A few reasons, which overlap a little bit:
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A second state has been put on the table at various times over the years (most recently at the end of the Clinton administration), but those proposals have not met Palestinian demands or Israeli demands. Sticking points usually include the borders and the status of Jerusalem. There has probably never been acceptable deal space at any single point in time for an agreement to be reached.
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There are minorities of both Palestinians and Israelis who do not want a two-state solution, and who recognize that all that’s needed to prevent that from happening is to instigate violent clashes that make the security conditions that are a pre-requisite to two-state solution impossible to achieve. And because one of those minority parties - Hamas - has been the de facto government in Gaza for the last two decades or so, that has eliminated all recent consideration of the two-state solution. The inclusion of another of those minority parties into the ruling coalition in Israel makes it even more dead, for now.
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The balance of power in the region has been re-ordered after the Second Iraq War. Where Iraq used to be a regional check on the ambitions of Iran, the overthrow of the Ba’ath government has eliminated that check. This has led various Sunni nations in the area to be more open to alliances with Israel as a check on Shi’a Iran, which increases the stakes for Iran to keep Israel and Palestine (which is majority Sunni) unstable and in conflict with each other.
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Growing support in the West - especially among the Western left - for a one-state solution. That a two-state solution is neither a fair nor sufficient remedy for the Palestinians, and a demand for a solution where all the former British Mandate area is open to both Palestinians and Jews in a multi-ethnic democracy.
Taken together - especially that last one - and my personal belief is that a two-state solution is probably dead for at least a generation. Hamas knows that Israel can never truly “win” as long as Hamas (or a successor organization) keeps committing significant acts of terror against them. Israel cannot allow acts of terror to go unchecked, but any measures that have a realistic chance of checking them will infuriate the global left. As long as they never agree to ‘half a loaf,’ eventually the world will decide that they’d rather have a Palestine than an Israel, and they’ll get the whole thing, and the jews will be expelled. Since Iran will never stop supporting their efforts, they will never lack for resources - and the only cost is the immisseration of a few more generations of Palestinians, which is a small price (to Hamas).