Islam recognizes Abraham, Moses and the other Jewish prophets. Furthermore, unlike Judaism, they accept Jesus as a prophet but not as the son of God. Finally, of course, Muhammad is believed to be his final messenger.
However, if that's the case and Islam accepts Abraham as a prophet why isn't his covenant with God (and later repeated with Moses) to offer the Jewish people the land of Israel recognized?
Jerusalem will always be open to Muslim worshippers but whats wrong with having Israeli sovereignty at Judaism's holiest site if Muslims already have sovereignty in Mecca and Medina?
The Qur'an says:
And [mention, O Muhammad], when Moses said to his people, "O my people, remember the favor of Allah upon you when He appointed among you prophets and made you possessors and gave you that which He had not given anyone among the worlds. O my people, enter the Holy Land which Allah has assigned to you and do not turn back [from fighting in Allah 's cause] and [thus] become losers."
Qur'an 5:20-21
Therefore, from an Islamic point of view, there is no fundamental reason which prohibits Muslims from recognizing Israel as a friendly State.
