The wishes and strategies of Israeli Jews and Palestinian Arabs are similar. Each party would like the other to disappear from the map. Each is willing to consider for a while peace, or interim arrangement or hudna, only because its final wish cannot be achieved due to practical consideration and constraints.
At each point of time, each of parties weighs and speculates on what is "better," temporary hudna or refusing it, according to perception of the state of affairs at a given moment. Any kind of agreement is workable only if both parties consider it beneficial at the same time. Such occasions are quite rare.
The tactics of the parties differ, according to their culture, relative and absolute power, mentality and relations with other players.
Palestinian Arabs consider, at least in principle, "terror" as beneficial means for achieving their objective. In their mind, "terror" is legitimate because of overwhelming superiority of Israel's military power. For many of them killing Jewish children is a justified act with the additional benefit of infuriating Jews. The "peace" as they see it, is a means of destroying Israel, for instance by flooding her with Palestinian real or imagined refugees, by never agreeing to end the conflict and so forth.
Jews act differently. Their logic in building their homeland has been proceeding acre by acre, as pragmatically as possible, while waiting for more opportunities for future expansion. Jews didn't expel the Arabs in 1948, but they were not particularly sorry, when Arabs fled. In 1967 General Ytzhak Rabin, later to become a peace icon, sent buses to Arab towns, hoping that Arabs will flee again. This time the didn't.
Each party reacts to actions and lack of them by its rival. "Concession," sometimes brings about counter concession and sometimes, perceived as weakness, it brings militant response. Israel withdrawals from Lebanon and Gaza were immediately responded by missile fire and terror. Similarly, non violence by Palestinian Arabs may bring about Israeli nonchalant increase in settlements. In any event moves and counter moves of the parties are not easily predicted.
Palestinian Arabs are attuned to Israeli public opinion and they are trying to manipulate it by creating impression that they are indeed "partners," or, alternatively, by creating fear of "demography," one state and new intifada. Jews, on the other hand know little and care even less about Arab Palestinian opinion. An average Israeli knows much more about Brussels or Budapest than about Ramallah.
The parties observe carefully the reaction of "world community," namely the US and Europe. Generally, when this community slams one party, the other is encouraged to more militant steps. "Peace" is certainly not the only objective of Europe and the US. They have political and electoral concerns as well. The rise of antisemitism, or the Left variant of it called Israel hate, in Europe, and growth of Muslim communities there do not make Israel the darling of the continent. The responses to actions of Jews and Arabs are less than sophisticated and usually they disturb the hudna rather than encouraging it.
"Arab world," is another factor which is important. Palestinian Arabs are usually suspicious about their support there. Palestinian Arab diaspora is in most Arab countries kept apart and discriminated. Arab wars against Israel in 47, 67 and 73 had no Arab Palestinian interests in mind, and similarly the peace agreements with Egypt, Jordan and the not achieved one with Syria didn't care about Palestinian Arabs. It seems to me, that antisemitism is more prevalent In Arab countries than among Palestinian Arabs. The "father" of Palestinian national movement was indeed a collaborator of Nazis and Hitler in Berlin, but his antisemitism was probably more the result of being Muslim Brother leader that an Arab Palestinian.
Jews look with great concern at what is happening in the Arab "spring." Its chaos convinces most of them that the only way to maintain the "villa in the jungle" flourishing is by forgetting about "peace," and making fortress Israel stronger.
Each party has strong, mostly negative opinions of its rival, which it proves by true or invented facts and cites as support God and lesser dignitaries. Some or all of those opinions, even if correct bring not much news and even less benefit. To exist in peace or war with your opponent, or even to wipe him out, it is much more important to know how he perceives himself and you than to voice your own opinion, which you of course know without much effort.
Peace seems impossible, but pragmatic arrangements and measures are achievable and could keep the conflict within acceptable parameters. BHO 2.0 apparently understands now that "peace" between Jews and Arabs is a complex issue and better to keep away from offering comprehensive solutions. Let the parties solve it or kill themselves. Yiddish, so it seems, has no words of wisdom for hudna.