Perhaps not the US due to the power of the zionist lobby there, but most nations would immediately recognise the state of Palestine. Isrtael would be further isolated. It is Israel's choice not to end the settlements which will eventually have to be dismantled and the colonists moved back to Israel. Any military actions by the IDF against the palestinian civilian population would be met with sanctions against Israel. Palestine has no other choice since Israel is not going to abadon its demographic struggle for dominance.
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Initial report: Man lightly wounded in stabbing attack at Gush Etzion junction in W. Bank. (Haaretz)
from the article: Abbas must unilaterally declare Palestinian state