The following answer is given solely on theological basis, excluding any political events or contexts.

Let's begin by saying that Abraham is the forefather of both nations. From Abraham's son Ishmael, the Arabs are born, and from Isaac the Jews. So far, there is no difference in views.
In Islamic teachings, when people depart from the way of God, Allah sends a prophet to lead them back to the right path. Many prophets were born on the branch of Isaac, the house of Israel, because the sons of Israel had to be warned many times. In the Torah, there is a phrase which, according to Islam's interpretation, is about the advent of a divine messenger who doesn't come from the house of Israel but from their "brethren", that is, from the house of Ishmael, who brings the final truth:

“I will establish a prophet for them from among their brothers, like you, and I will place My words in his mouth; and he shall speak to them all that I shall command him.” (Deuteronomy. 18:18 A Prophet like Moses)
Similar references are mentioned according to Muslim interpretations in 5:16 Song of Songs of King Solomon, 33:2 Deuteronomy, 42:1-13 Isaiah and 3:3 Habakkuk.

The prophecy of Mohammed (peace be upon him) was accepted by some Jews but rejected by the majority. Their learnt scribes explained the Scripture accordingly.
Mohammed began the formation of the state in Medinah by creating alliances and "brotherhoods" with all Arab and Jewish tribes. It turned out, however, that it was a sincere alliance from the side of Mohammed and his followers, while it was a pretended on behalf of the Hippocratic Arab and Jewish tribes, which served only to gain time. They did not expect that Islamic State can strengthen and did not want to break their traditional trade relations with the pagan Arab world. In the former Yathreb, which later was called Medinah, there were three main Jewish tribes. Banu Qainuqa, Banu Nadir and Banu Quraizah. At the time, when military offensive started against the Islamic State, these Jewish tribes broke up the "brotherhood alliance" and betrayed the state. Bani Qainuqa in the Battle of Badr, Bani Nadir in the Battle of Uhud, and finally Bani Quraizah in the Battle of Trench defected. In order to understand the defection and the circumstances surrounding it, of which the consequences affect this day, I must describe the essential events of at least the last one, the Battle of Trench.

It was in fact a combined raid by many of the Arab tribes, who wanted to crush the power of Madinah. It had been instigated by the leaders of the Bani an-Nadir, who had settled in Khyber after their banishment from Madinah. They went around to the Quraish and Ghatafan and Hudhail and many other tribes and induced them to gather all their forces together and attack Madinah jointly. Thus, in Shawwal, A. H. 5, an unprecedentedly large army of the Arab tribes marched against the small city of Madinah. From the north came Jews of Bani an-Nadir and Bani Qainuqa who after their banishment from Madinah, had settled in Khaiber and Wad il Qura. From the east advanced the tribes of Ghatafan, Bani Sulaim, Fazarah, Murrah, Ashja, Sad, Asad, etc. and from the south the Quraish, along with a large force of their allies. Together they numbered from ten to twelve thousand men. I won't go into the details of the battle. The bottom line is that the Muslims, despite the overwhelming power of their enemies, have won and it has been proved that the Islamic State of Medina cannot be defeated militarily.

When the Holy Prophet returned from the Trench, Gabriel came to him in the early afternoon with the Divine Command that the Muslims should not lay aside the arms yet but should deal with the Bani Quraizah as well. On receipt of this Command, the Holy Prophet got announced: "Everyone who is steadfast in obedience should not offer his Asr Prayer till he reaches the locality of the Bani Quraizah." Immediately after this, he dispatched Hadrat Ali with a contingent of soldiers as vanguard towards the Quraizah. When they reached there, the Jews climbed on to their roof tops and started hurling abuses on the Holy Prophet and the Muslims, but their invectives could not save them from the consequences of their treachery. They had committed breach of the treaty right at the most critical moment of the war, joined hands with the invaders and endangered the entire population of Madinah. When they saw the contingent of Hadrat Ali, they thought that they had come only to overawe them. But when the whole Islamic army arrived under the command of the Holy Prophet himself and laid siege to their quarters, they were very frightened. They could not stand the severity of the siege for more than two or three weeks. At last, they surrendered themselves to the Holy Prophet on the condition that they would accept whatever decision Hadrat Sad bin Muadh, the chief of the Aus, would give. They had accepted Hadrat Sad as their judge because in the pre-Islamic days the Aus and the Quraizah had been confederates and they hoped that in view of the past ties he would help them quit Madinah as had happened in the case of the Bani Qainuqa and the Bani anNadir before. The people of the Aus themselves wished that Hadrat Sad treat their previous allies leniently. But Hadrat Sad had just experienced and seen how the two Jewish tribes who had been allowed to leave Madinah previously had instigated the other tribes living around Madinah and summoned the united front of ten to twelve thousand men against the Muslims. He was also aware how treacherously this last Jewish tribe had behaved right on the occasion when the city was under attack from outside and threatened the safety of the whole of its population. Therefore, he decreed that all the male members of the Quraizah should be put to death, their women and children taken prisoners, and their properties distributed among the Muslims. The sentence was carried out duly. When the Muslims entered their strongholds they found that the treacherous people had collected 1,500 swords, 300 coats of mail, 2,000 spears and 1,500 shields in order to join the war. If Allah's succor had not reached the Muslims, all this military equipment would have been used to attack Madinah from the rear right at the time when the polytheists were making preparations for a general assault on the Muslims after crossing the Trench. After this disclosure there remained no doubt that the decision of Hadrat Sad concerning those people was absolutely correct.

And those of the People of the Book who aided them - Allah did take them down from their strongholds and cast terror into their hearts. (So that) some ye slew, and some ye made prisoners. (Quran 33:27)

The reference is to the Jewish tribe of the Banu Qurayzah. They counted among the citizens of Madinah and were bound by solemn engagements to help in the defence of the City. But on the occasion of the Confederate siege by the Quraish and their allies they intrigued with the enemies and treacherously aided them. Immediately after the siege was raised and the Confederates had fled in hot haste, the Prophet turned his attention to these treacherous "friends" who had betrayed his City in the hour of danger.
Sa'd applied to them the Jewish Law of the Old Testament, not as strictly as the case warranted. In Deut. 20:10-18, the treatment of a city "which is very far off from thee" is prescribed to be comparatively more lenient than the treatment of a city "of those people, which the Lord thy God does give thee for an inheritance," i.e., which is near enough to corrupt the religion of the Jewish people. The punishment for these 22 is total annihilation: "thou shalt save alive nothing that breatheth" (Deut. 20:16). The more lenient treatment for far-off cities is described in the next note. According to the Jewish standard, then, the Banu Quraiza deserved total extermination-of men, women, and children. They were in the territory of Madinah itself, and further they had broken their engagements and helped the enemy.
Well, within the history of Islam, this is the delicate five years that both sides bring up to justify themselves. The Jews consider as genocide against them, while the Arabs consider it not as a racial issue, but as a betrayal. If hatred is to be incited, both sides bring arguments from these five years, provided that theological considerations are taken into account. Everyone forgets that before and after the critical five years, the two peoples were mostly ally, fighting on one side, achieving scientific results and running states together. The last 70 years, the founding of the State of Israel, once again brought to light the arguments of the critical five years. We are experiencing this today.

In the introduction I said that many prophets were born in the branch of Isaac, the house of Israel, because the sons of Israel had to be warned many times. It is true. However, let’s be objective and declare, that Arabs and Muslims have also went astray in the course of the last 1400 years, regardless we have the final message of Allah in our hands. We have no any legitimacy to criticize anybody based on theological aspects. Our practice of faith and the classical Islamic teachings shows essential differences.
Perhaps a generation will come who can overcome the millennial prejudices. Amen