It's the "Jewish" in Jewish state that lies at the root of the conflict, isn't it? There aren't many options to maintain a dominant ethnic identity in a democracy when the land the nation was founded on was already inhabited by people who don't share in that identity. The only option is to either cede that ethnic identity or to engage in mass displacement and disenfranchisement.
It's exceedingly subtle the way ethno-nationalism gets smuggled into the phrase "as a sovereign Jewish state," but it is no less terrible and ugly than the ethno-nationalism in other parts of the world and eras in history.