A secular democracy composed of about half Arabs/Muslims and half Jews arises in the region as the West's main ally, while the East tends to support 'anti-imperialist' Arab states.
People will complain that Jewish citizens have too much economic power, other people will complain that Arab growth rates are too high, but I think the whole thing would stick together, being propped up by the West.
And if half-Arab, half-Jew doesn't sound unstable enough, why not stick Lebanon into the mix? This state will control Jerusalem, so maybe it should have Christian, Muslim, and Jewish citizens, who have an equal say in access to the sites and sights of the city.