BOTH LEADERSHIPS WANT IT THIS WAY.
At a minimum, both keep power this way. #1 priority of crazy authoritarians: maintain power.
There is no humanitarianism. Humanitarianism is a secular idea. These are two religious extremist regimes. There are no secular priorities by either government. Only religious extremist views. Neither side will negotiate or coexist in a secular peace.
Yes, Hamas will happily throw away massive numbers of its people if it thinks its winning. That's the entire strategy. Yes, they get paid to do that by various states like Iran and the UAE. That's the only money that comes into the palestinian territories: humanitarian aid (which is funneled/controlled by the PA or Hamas) and military aid, which gets funneled to Hamas (I admittedly know less about how the PA works, I think they are the same just not as bad) and they use to maintain authoritarian control over Gaza.
The military aid enables Hamas to keep power, and it only comes if they keep poking Israel.
Is it cruel of me to point out that expanding your population by 10x when they are virtually entirely dependent on external aid is absolutely crazy? And yes, sorry, the only reason I can think of other than incredible stupidity is for cannon fodder.
Why wouldn't a two state solution work? Well it would be a three state solution if we're serious, no way the PA in West Bank shares power with Hamas in Gaza. No effing way. And yes, they would still launch rockets at Israel. Because, again, that's what Hamas leadership gets paid to do, and having a state won't change that. If you think otherwise, I'm sorry, I think you are naive.
And yes, Israel/Netanyahu will look for ANY provocation to loose the barrage. Here, I'll give you a conspiracy theory: they'll false flag if they have to. Pay some group to start the war. I think there's a conspiracy theory they rigged this provocation. I'll give you that, sure! What would having a state matter?
Look, the Palestinians are in a really really bad situation in terms of power dynamics. Only in modern (secular) international politics do the Palestinians even get to voice an opinion. Go ahead and argue about books or historical rights or atrocities. It won't change anything, Israel has a military that can wipe you out, and even if it seems like this is unrestrained: it isn't.
Egypt will never let Palestinians into Sinai. Jordan will never again take them, Kuwait kicked theirs out, no Arab state will take them. They need to figure out a way to survive in Gaza. They are grossly outgunned, and only modern (secular) international relations prevents Israel from doing what the Mongols did to Baghdad.
The oil is going to get less important with alt energy and EVs. Global warming is coming. THE MONEY WILL DRY UP. International attention will return to the apathy in line with the Tigray war and Azerbaijan-Armenia and Turkey-Kurds, and whatever else is going on in the world.
When that happens, aid stops, food stops, gun shipments stop. Either Israel annihilates the Palestinians then, or they starve. Pick one!
Hamas needs to step down and surrender and accept any peace they can get. Yes Israel builds settlements and encroaches. Beg Egypt to once again take over administration of Gaza (they won't ...) Beg someone to do it, get Hamas out of power. Only way a two state solution works is if someone Israel trusts just a bit takes over Gaza for a decade on a path to independence.
If Hamas cared about its people, its children, its wives, it would step down. Right? Because they are humanitarians? Find some Arab country that will accept their surrender and provide sanctuary? Because the united Sunni brothers would do that for humanitarianism? You and I both know that will never happen.
The people in control will risk total destruction over the surrender of any power, money, or control.