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Why is Israel afraid of the establishment of a Palestinian state?

The decision by Norway, Ireland, and Spain to officially recognize Palestine has sparked debates in Israel. The Israeli public sees this development as a significant shock, unprecedented for Tel Aviv, while it is known that many other countries are preparing to take similar steps. So why is Israel anxious? Why is it afraid of a two-state solution?

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Currently, there are approximately 250 illegal Jewish settlements in the West Bank, occupied by Israel since the 1967 war. Over 500,000 Jewish settlers live in these settlements. According to international law, all Jewish settlements in the occupied territories are considered illegal.