I see what you mean. many places are comprised of people of a certain ethnic group, ie mostly Jewish areas, or Arab villages and cities, and so on, although there are also places who have people of the different ethnic groups leaving in the same city, some like the city Haifa, boast of co existence between the groups. there is a fair share of Arab students in my university and other Israeli universities.
also the 'general hostility' in the middle east has many layers, leaving the media attention on the Israeli-Palestinian issue, there are more dramatic issues in the region.
as for everyone 'having issues', it doesn't matter to me if a person is a Muslim, Buddhist or Satanist, all he has to do to gain my respect is behave as a human being. I enjoy traveling to nations like Jordan and Egypt, and it was not uncommon for me in Britain and other pars of Europe to get along well with Muslims from Iran, Pakistan, Morocco, Egypt, Syria, Lebanon, etc.
I actually have some interesting stories in that regard.