One school of thought on the Israel/Palestine conflict is that Israel should give everything “back” to the Palestinians. It’s an extreme view, but the logical case is straightforward and at least somewhat compelling. The argument is:
Israel stole the land from Palestinians.
It is morally wrong to steal property. Stolen property should be returned.
Conclusion: Israel’s land should be returned to the Palestinians.
One objection to this argument is that it would apply to every country on Earth. Every square inch of land on Earth was stolen from somebody at some point (and they stole it from someone before them). Maybe there is a moral statute of limitations: maybe after a long time, an ownership right to a piece of property is no longer valid. It is plausible that it might be morally permissible for you to use force to recover a house that was stolen from you, but not morally permissible for your great-great-great grandkids to use force to recover a house that was stolen from you.
However, in Israel’s case the violent theft of land and homes is still recent. 1948 feels like a long time ago, but there are people still alive today who were personally expelled from their homes by Israeli militants in 1948. If a young child is kicked out of his home by masked gunmen who kill his father, it seems hard to deny that when the child grows up he would be within his rights to go back, kill the gunmen and retake his childhood home. Since many of the victims and perpetrators of the 1948 expulsions are still alive, the situation with Israel is very different from say, the great grandchildren of former slaves who demand reparations from the great-grandchildren of former slaveholders.
But if you hold that land obtained by theft should be returned, the Arabs should give a lot of land back to the Israelis as well. Around the time that Israeli militias expelled hundreds of thousands of Palestinian Arabs from their homes in what is now Israel, Arab countries expelled hundreds of thousands of Jews from their homes in Morocco, Algeria, Libya, Egypt, Lebanon, Syria, Iraq, and Yemen. The Jewish populations in those countries had been living there for centuries.
And this brings us to the biggest reason that I don’t believe Israel should disband itself and give the land back to the Palestinian Arabs: They would not do so if the roles were reversed. We hear the language of human rights and moral obligation applied to Israel, yet we almost never hear Jews demand that Arab countries return the property which they stole from Jews in 1948. The reason that we hear demands for accountability from Israel and not from the Arabs is because Israel is the side which will even consider fulfilling its moral obligations. The Arabs would laugh at the suggestion that they should make amends to the Jews they wronged in ‘48. They only use moral language as a weapon against the gullible West.
The anti-civilization idea lurking behind criticism of Israel’s founding is that whenever Westerners conquer land in a morally unjustifiable way they are required to give it back, but whenever Muslims conquer land in an unjustifiable way, they keep it and laugh at the suggestion that conquest is wrong. It is not justice - in fact it is an inversion of justice - to apply moral standards to people who feel obliged to at least consider following them, and never apply those moral standards to people who have no concern for morality.
In conclusion, the expulsion of the Jews by the Arab countries in the wake of 1948 tends to justify Israel’s territorial claims as of 1948. You’re not calling for justice if you’re calling for one tribe to return the stolen land, but not the other. It would be unjust for the Jews to return that land while receiving nothing in return. When it comes to land claims in the Israel/Palestine conflict, two wrongs make a right.
I think that theft of land is categorically more serious than theft of money, so I'm not sure if the transfer payments count as reparations.
The middle ground position is that Israel should make restitution to Palestinians who are the descendants of those who had property confiscated in 1948. It is true that Arab countries would not consider doing the same to descendants Jewish refugees, but I believe Jews can afford to be better than Arabs. It would be an act of unreciprocated magnanimity, but magnanimity is good for the soul, and a trait that Jews would benefit from cultivating.
However, the main Palestinian claim is different, namely that Palestine as a collectivity belongs to the Palestinians as a collectivity. This is a metaphysical claim, that we might call religious. Such metaphysical claims cannot be settled by argument, they can be only be settled by war, and the Arabs have tried that multiple times, so they should quit it.