> Prior to this both sides were living reasonably peacefully in Israel and Gaza
That's simply not true. Israel never gave up control over airspace, land and sea borders after the disengagement and effectively put the strip under siege after Hamas came to power.
The west bank is cut up into hundreds of small Palestinian enclaves that are separated and controlled by the IDF. There is also a policy of systematically denying Palestinians in the West Bank resources and on the other hand priorizing the settlers.
Both areas have been under siege for decades, just with different intensity.
When the current government was elected - a year before Oct.7 - it made speeding up the land grabs and eventual full annexation of the West Bank a priority. Look at the ministers Ben Gvir and Smotrich: Both have deep connections to the settlers and have made deeply dehumanizing statements towards the Palestinians. (Smotrich officially published his "Decisive Plan" in 2017 about his proposal for a "permanent solution": Either "encourage emigration", allow them to live as non-citizens with restricted rights in isolated enclaves or "let the army deal with them". Both ministers are fully on board with the current starvation policy - or rather, it's still too lenient for them)
Ben Gvir is now head of the Israeli police. Smotrich is finance minister and "Minister in the defense ministry", a special role that gives him the ultimate authority about anything that concerns the West Bank.
When I said reasonable peacefully I meant not killing each other and quite a lot of people in Gaza were crossing for jobs on the Israeli side of the border. I wasn't say love and social justice reigned.
When westerners and people like Bill Clinton have got involved they have mostly proposed having a Palestinian state with their own land but the Palestinians have mostly objected to Israel existing so we have the current stuff.
Yes, there was an exchange of job seekers, however even that was among a deliberately resource-constrained Gaza, with no hope of the situation improving.
Hamas was definitely not helping in those regards and Oct.7 cannot be excused. But Israel also never did anything to support an alternative to Hamas.