This conflict, contrary to popular belief, is not over religion, as most would assume; rather, it is a long-standing, unresolved argument over the division of the land. The religion does play a part because of the history of the region, but it comes down to the land. This area of land is small, about 10,000 square miles (or the size of the state of Maryland) and following a war in 1948-1949, it was divided into three parts: the state of Israel, the West Bank (of the Jordan River) and the Gaza Strip.
The Jewish people believe that their claim to this land is based upon the Biblical history of Abraham and his descendants. This site is the historical Jewish claim to the Kingdom of Israel (which was destroyed by Rome) and the Jewish need for freedom of from anti-Semitic European countries.
The Palestinian/Arab people claim that this is their land based on continuous residency on the land for hundreds of years and that they have the demographic majority. Additionally, they reject the notion that a biblical-era kingdom is a valid argument for a modern-day world. If the Arab people entertain the religious argument at all, they state that Abraham's son, Ishmael, is the forefather of the Arab nation and therefore, God's promise of the land to Abraham's descendants should include Arabs as well. The Palestinian people believe that they should not have to give up their land to the Jewish people simply because of Europe's crimes against the Jewish nation.
I hope this helps! Good luck!