If you want to see Israelis and Palestinians attempt to make peace, you should head for the National Theatre in London – because you certainly won’t see them doing it anywhere else, least of all in the land they both call home. On stage, it’s all there. The sweat, the tears, the angst are laid bare in Oslo, the Tony-award winning play whose London transfer is just beginning. It tells the improbable story of the secret back-channel opened up by two Norwegian diplomats in the early 1990s, which ultimately led to the White House lawn, where Yasser Arafat and Yitzhak Rabin shook hands, watched by a smiling Bill Clinton, 24 years ago.

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I saw the play just before I headed to the region, where I’ve spent the last week criss-crossing between Jerusalem and Ramallah, Tel Aviv and Jericho. In light of the conversations I’ve had with officials, current and former, on both sides, I’m afraid Oslo looks more and more like a period piece – a nostalgic reminder of a time when peace between these two peoples appeared to be just within reach.

No one thinks that now. “The peace process as we knew it has ended,” the former Israeli foreign minister Shlomo Ben-Ami told me ruefully. “At the moment, the peace process is dead,” echoed the former Palestinian prime minister Ahmed Qurei, now immortalised as one of the secret peacemakers in Oslo (and still chain-smoking as intensely as his onstage avatar). Those whose days were once consumed with position papers and maps, security plans and phased implementation periods now sit idle in offices hushed with inactivity.

Israeli politics is focused elsewhere, whether it’s the corruption allegations that threaten to topple Benjamin Netanyahu or a national debate that’s shifting ever rightward: Netanyahu recently promised that Israel will never dismantle or evacuate another Jewish settlement in the occupied West Bank. “We are here to stay forever,” he said.

Meanwhile, many Palestinians, especially younger ones, have walked away from politics as it was conventionally understood. In a powerful, if gloomy, essay in the New Yorker, headlined “The decline of the Palestinian national movement”, Hussein Agha and Ahmad Khalidi, both sometime negotiators, write that “the entire notion of peace negotiations has been discredited and consigned to outright condemnation, deep disbelief and profound apathy among Palestinians.” Others have noticed a change in the next generation of the West Bank elite, who are retreating into the internet or dance or rock-climbing – anything to escape the futility of perennial conflict. The peacemakers now comprise a legion of old men, looking back on their mistakes.

The result is that even some of those most dedicated to the two-state solution – the defining goal of peacemaking efforts over three decades – are looking elsewhere. I watched the veteran Israeli novelist AB Yehoshua tell a Jerusalem audience that he has wanted to see two states, Israeli and Palestinian, side by side for 50 years, but he has to accept that it’s just not happening. “It’s time to think of something else.”

How has this come about? How have the dreams that animated those players on stage in Oslo turned to dust? One explanation is difficult for campaigners against Israel’s 50-year-long occupation to stomach. They – we – always warned that the occupation was “unsustainable”, and yet Israel is proving that it is very sustainable indeed. The economy is thriving, while a lull in violence means that – for now – most Israelis feel secure day to day.

Internationally, things have rarely been more comfortable. Sure, Netanyahu faced loud street protests during his tour of South America this week, but India and China – once allies of the Palestinian cause – are doing plentiful trade with Israel. Even the supposedly leftist Alexis Tsipras of Greece has embraced Netanyahu, hosting and visiting him and sealing a major natural gas deal between the two countries. If one reason for Israel to end the occupation and make peace with the Palestinians was to improve its international standing, that motive has lost its urgency.

The leading Sunni Arab states now regard Iran as a greater enemy than Israel

Those who might once have exerted pressure – pushing Israel, as the stronger party, to the negotiating table – have got other things on their mind. Diplomats report that these days when Israeli ministers meet their foreign counterparts, the Palestinian issue scarcely gets mentioned: it used to be the first item on the agenda. Though they don’t say so out loud, the leading Sunni Arab states now regard Iran as a greater enemy than Israel; their focus is pushing back Tehran and securing their own regimes rather than helping the Palestinians. The European Union has enough on its plate, while the US foreign policy establishment has its hands full ensuring Donald Trump does not set off a nuclear war with North Korea. The peace process needs the international community, says Ben-Ami: “Yet there is no such thing. The international community is in disarray.”

More deeply, there is the gap between the two sides. When the last serious talks ended, it was because the maximum Israel was prepared to offer fell short of the minimum the Palestinians were prepared to accept. That stalemate endures. If anything, the gap is wider now, as Israeli positions in particular have hardened.

Does that mean these two nations are doomed to stay stuck in the status quo, one that sentences the Palestinians to apparently eternal occupation? Tony Blair, still active in the region, reckons the best prospect is a regional one, as those Sunni states already enjoying close, if furtive, military ties with Israel formalise the new dispensation with a peace accord. Saudi Arabia and the Gulf states would join Jordan and Egypt, and pressure the Palestinians to sign on too. That, at least, is the theory. Netanyahu talks of this “outside-in” approach too, but there’s precious little evidence of it in practice.

Or there could be a change of paradigm, a shift away from the two-state ideal to a civil rights struggle inside the single-state reality that exists on the ground – with, perhaps, a lead role for those Palestinians who don’t live in the West Bank but are citizens of Israel, living inside the state’s pre-1967 borders.

Still others reckon that some game-changing event may come along and shake everything up once more, taking advantage of the presence of the octogenarian Mahmoud Abbas as perhaps the last Palestinian leader with enough national legitimacy to sign a deal before it’s too late. After all, they say, the peace process has been pronounced dead before – yet has shown an uncanny knack for resurrection.

That would be quite a twist. But as audiences at the National Theatre are about to discover anew, this longest-running of dramas is one story that refuses to have a happy ending. It remains a tragedy without end.

• Jonathan Freedland is a Guardian columnist