[Valin]

On the assumtion that there will be a Palestinian state, An argument could be made that it would be in their best interest to ally themselves with Israel. Given the snake-pit like politics of that area They'll need someone to protect them from their "good neighbors".
Weather they have the sense too see this or not is a subject for another time...but I doubt they do.

[Alberta's Child]

You raise an interesting point. I would think that in an ideal world, Israel and Palestine could maintain relations similar to the U.S. and Mexico, in which Palestine becomes a manufacturing center for things that can't be produced efficiently in Israel.