Currently in the world , there are 22 Arab states and 56 states with a Muslim majority. Israel is the only country in the world with a Jewish majority and it is only a tiny sliver of land that is about 1/800 the size of the Arab world. After 6 million Jews were murdered in the holocaust, the world decided that these people who suffered for so long and who contributed so much to the world should have a tiny peice of land to call their own.
There are people of many faiths living in Israel and, in an ideal world, they would be able to live together peacefully. It is not to be overlooked, however, that the reason for the creation of Israel was to provide Jewish people with a refuge in which they could live openly and without fear following the events of WWII. So although it may not officially be a Jewish state, Israel is already, in nature, a Jewish state.
Israel is home to Muslims and Christians, not just Jews. To label Israel a Jewish state would only incite Muslims in neighboring countries to perform more acts of terror upon Israelis. Labeling Israel a Jewish state makes them arrogant in thinking God has ordained these people to have these lands, despite the Palestinians living in the area before Israel was even created. To recognize the Jewish state is haughty at best, inciteful at worst.