The Israelis were taking very suspicious actions in an area that has been plagued by vandalism and theft. After failing to identify themselves, one of the thugs drew a weapon, whereupon the Palestinian stabbed the man he thought was a would be vandal/robber. It appears to be the fault of the soldiers.
Justice Ministry: Information examined by AG about Gal Hirsch didn't come from police (Haaretz)
from the article: IDF failed to investigate why soldier killed Palestinian