The general consensus of most news outlets is that it is the wrong time to move the American embassy to Jerusalem and that it should only happen after a comprehensive peace agreement between the Arabs and the Israelis. It seems to me that there is a misunderstanding regarding exactly where the proposed new location of the embassy is.
Many don't realize that Jerusalem is actually divided into two separate cities. There is the new Jewish city, known as West Jerusalem or New Jerusalem, and the Old City which has always been home to four different ethnic minorities; Jewish, Arab, Greek Orthodox and Coptic. While the two were united in 1967 after the Six Day War and are now one city they are nonetheless very different.
The American embassy is set to be moved to West Jerusalem, the Jewish city, which is only about 150 years old. This New City, New Jerusalem, is located in an area that was recognized as Israeli undisputed territory by the UN since Israel's independence in 1948, way before 1967 when the Old City became part of Israel. The embassy is moving to an undisputed Israeli area.
When the US recognized the state of Israel, (the first one to do so among all nations) it recognized the right of the Israelis for self determination. That meant that they can choose their capital to be anywhere they want as long as it is within a recognized Israeli territory. Therefore putting any embassy in West Jerusalem back when Israel became independent in 1948 should have not created any political issues.
So why the refusal to locate the embassy in a legitimate Israeli territory? While the Arab leadership does not claim West Jerusalem to be an Arab territory, they have a problem with any Israeli territory. Despite the fact that West Jerusalem has always been an Israeli city, it still represents by its very name the eternity of the Jewish people and the permanency of the state of Israel. The Arab leadership can't have that!
When Israel became a state, only the undisputed West Jerusalem and not the disputed Old City of Jerusalem were part of the territory. The excuse the Arab leadership gave with their insistence that embassies were to be located in Tel Aviv was that the fate of the legitimate Israeli territory of West Jerusalem should be decided in a negotiation. That means that any Israeli territory is up for negotiation translating to Israel’s existence is up for negotiation.
America and the rest of the world bowing to Arab demands to not locate its embassy inside a legitimate and recognized Israeli territory is not only illegal but also amounts to political extortion. In 1995 Congress recognized this and enacted into law the movement of the embassy to Jerusalem. Our American presidents circumvented the law through a loop hole which allowed the postponement of this decision. The constant circumvention of this law is not the way to respect the decision of the Congress.
By being a part of this travesty, the United States gave legitimacy to an Arab claim that at present Israel has no right to exist and that its fate as a country depends on negotiation with the Palestinians, many of whom in Gaza, Lebanon as well as the West Bank want nothing less then a complete destruction of Israel. This is what the leadership has been teaching their children (or shall we say brain washing them) for the last 70 years.
If the Palestinians want a destruction of Israel why are they willing to negotiate a peace agreement? To begin with, many of the Palestinians in Gaza and Lebanon flatly refuse to negotiate peace with Israel not now not ever. Those who are willing to negotiate live in Judea and Samaria ("the West Bank")
But in order to understand their motive, one needs to understand what for them is not negotiable. They will not negotiate their right to "Return to Israel" which means they want to flood Israel with (according to them) 1.5 million Palestinians "Refugees" as a way to slowly but surely erode the Jewish Majority in Israel.
In other words, it is their long range plan to take over the country without war. The Palestinian emblem is the map of Israel. Their doctrine which they refuse to change is Palestinian control of Israel with a Jewish population as a minority with no influence.
Therefore, the reason the Arab world is so upset with this preeminent decision is because it symbolizes the eternity of the state of Israel. It tells the many fanatics among the Arab countries as well as the Iranians that the destruction of Israel is nothing but a pipe dream.