The location of US Embassy has nothing to do with the peace.

Palestinian Arabs are darlings of the world for warring with Israel: they are given billions of dollars by US, Canada and EU to make peace with Israel and tens of millions of dollars by Arab states, Iran and Turkey to war with Israel, at the same time. 

Should Palestinian Arabs make a peace with Israel, these billions of dollars will be gone and the new Palestinian Arab state will get as much of interest to itself, as some obscure country in the middle of Africa gets now.

Palestinian Arabs are no idiots to lose all that funding for no practical reason: Israel is not warring with them anyway and they have nothing to gain.