That is precisely why the United States is in this current mess.
"The dispersal of the Palestinians in 1948 deprived them of the basic right to citizenship. Arab states do not grant foreigners full residency status, which includes either naturalization or permission to remain indefinitely. As for the progeny of foreigners, neither prolonged stay nor birth in the country is considered a valid basis for claiming residency or nationality. In the case of the Palestinians, most countries have special provisions prohibiting naturalization on political grounds and in accordance with Arab league resolutions. Furthermore, marriage to a female citizen of a country does not constitute grounds for naturalization or special residency rights either for the husband who is not a national or the resulting children. Very few Palestinians in Syria and Egypt managed to obtain citizenship, and those who did were mainly from families who had settled there before 1948. In Saudi Arabia and other Gulf states, few families were granted nationality as acknowledgment of their long and special service to these countries. In Lebanon, about fifty thousand Palestinians, mainly Christians or those having family connections, acquired Lebanese nationality in the 1950s and 1960s."
In other words, Israel's refusal to grant citizenship to foreigners is right in line with and no worse than any other Arab state's attitude toward foreigners.