Jonathan Zasloff from the Reality Based Community quotes from the Israeli newspaper Haaretz:
This is potentially huge: Hamas leader Khaled Meshal, generally considered a hard-liner within the group, has acknowledged the existence of Israel:Israel is a "reality" and "there will remain a state called Israel, this is a matter of fact," Meshal said in an interview. The problem was not Israel's existence but the failure to establish a state for Palestinians, said Meshal, whose party leads the Palestinian government.
Unfortunately, the current crop of right-wingers in power in Israel aren't interested in coexistence with the rest of the Arab world, let alone the Palestinians. They have already knocked back serious offers from Saudi Arabia, the spiritual head of Islam, to recognise Israel's right to exist. I predict that this will go nowhere.