Simple. just place the US embassy and all other embassies in the area west of the armistice line. Unfortunately, in the view of Arab Muslims these embassies would be in Jerusalem, and be recognized as Israel's capital. This despite Jerusalem being established as the capital of Israel over 3,000 year ago.
The problem is that all Palestinian Arab groups (PLO, Hamas, and all others) claim that Israel has no right to exist at all. They refuse to recognize Israel as a Jewish state.
Most of them view the states of Jordan and Israel, along with the area called the West Bank, to be the Palestinian state. “From the river to the Sea” is their cry.
Over the last 70 years nothing has changed. Areas of the world invaded, taken, and occupied by Muslims invaders are viewed by Muslims as permanently and forever part of the Muslim world.
They play word games, and refuse to negotiate a peace deal.
If embassies were placed in what is known as the western area of Jerusalem (the area that has been part of Israel since 1948), the Muslim world would be enraged. They would be enraged because the embassies would be in part of a city and area that they claim as Palestinian. Remember that they claim Palestine covers the area from the Jordan River to the Mediterranean Sea, along with Jordan.
For the record, we have a consulate in Jerusalem and it’s near the Damascus gate of the Old City where the arab quarter is.