And I think you have that backwards. The problem (in the eyes of some) with Israel is that it is Jewish.
In the Arab world there are many countries that have border disputes with one another, but they don’t completely refuse to acknowledge the existence of each other. There are countries that oppress Muslim minorities and get along famously with the Arab World (China and the Uyghurs, of course, but also Russia and the Tartars and other minority groups; and of course, many Arab countries have Muslim minorities that are oppressed - Morocco’s disputed territories for example, or the neighbors of the Kurds).
Yet we don’t see the Arab world unite against China and Russia for their ethnic cleansing of Muslims.
The problem with Israel is that it is Jewish, and the Jew (under this worldview) isn’t supposed to have a state; he is a homeless wanderer, to be tolerated and benefited from if convenient and discarded if not. A Jewish State, from that point of view, is an abomination.
You are right that if Israel did not exist then Jews would perhaps be tolerated in parts of the Arab world where they are not today, in that they wouldn’t be killed on sight; but they would not be accepted as part of society. Their role would be the same as it had been in many societies around the world, before the modern era. They’d be around, doing the best they can, but they’d be subject to all kinds of restrictions (enshrined in law or only de facto); and occasionally they’d be subject to incredible violence, state sponsored or spontaneous, to remind them of their place.
This is the existence that many religious minorities in the Arab world face today; there is no reason to think that this would not be the case if Israel did not exist.*
This is the Jewish existence that Zionism rejected, and this is why Zionism draws so much Anti-Semitism. People point to the Holocaust, but they forget that Zionism predatws the Holocaust by decades. This is because even before the Holocaust, the Jewish existence was intolerable, and had been intolerable for two thousand years.
(*And this ignores the possibilty that without Israel, Pan-Arabism may have been more successful, or it may never have come about; and depending on the specific ideology of a potential Pan-Arabic leader, this could be great or disastrous for the region’s Jewish population).