In 1967 when Judea and Samaria were already annexed by Jordan there was no call to form a "Palestinian" state on that land and no settlements and yet the Arabs waged war on Israel. Therefore, it's clear that not the absence of a "Palestinian" state or the existence of "settlements" are the cause of the conflict. Peace has nothing to do with those two things and everything about the existence of Israel.
53-year-old Israeli woman lightly wounded by stone-throwing near Efrat settlement (Haaretz)
from the article: Netanyahu: Give peace, and my coalition, a chance