Excellent question. To bad so few are asking it.
I lived in Jerusalem in the 1970's. Back then it was perfectly safe to walk through straight through the Arab shouk in the Old City. All the Arab shopkeepers were making money as never before, and welcomed Israeli and Western customers. They were far more prosperous under Israeli "occupation" than they had been under Jordanian rule.
Because 'occupation' is not the reason for the terrorism, but rather the excuse for it.
The reason for the terrorism is that the Israeli, American and European left imposed upon the Palestinians a Nazi bred Jew hating dictator with decades of experience is wreaking havoc. His goal was not to make peace, but to entrench himself and make (another) war inevitable.