Are the setlements a provocation, or a response to provocation?
Try taking any people on the earth, slaughter 6,000,000 of them, then attack and terrorist the survivors every day for 20 years, and then watch and see if they get a bit paranoid about their security...
It's easy for us (non-Jews) to say that the settlements are unwise, but it's perfectly natural for Israel to desire buffer zones around their borders and advanced lines of defense. I certainly can't justify the occupation in religious terms, but I sure understand it in terms of security and the survival of the state of Israel.
Of course it would be wiser to occupy without colonizing.