Well, considering that Israeli's are occupying land that rightfully belongs to someone else, I'd say not very well indeed. It's the final major European colonial outpost, and its fighting hard not to go the way of Algeria, Kenya, Malaya and a long long list of others.
First a colony is one controlled by a foreign nation. Next the population of Israel is, or was, about half Sephardim. Meaning Jews from the Middle East, many of whom were unwilling expelled from Muslim countries.
Secondly Arab Muslim Palestinians could also be considered colonizers if ones that’d been there many generations.
The Israel and Palestine conflict in many aspects is more similar to between Turkey and Greece after WWI. In 1923 they “swapped populations” due to the aftermaths of Greeces independence from the Turkish Ottaman Empire and the following wars. Populations which had lived together segregated after the wars and were expelled on both sides in roughly equal numbers.
It was similar after the 1948 war with about 850,000 Middle Eastern Jews and 750,000 Palestinians being displaced.
Except Palestinians were never integrated into Egypt or Jordan. Partly by their own choice and partly by that of the Arab countries. The stated goal was that they’d destroy the new state of Israel and return.