There are major problems with this line of reasoning.
Israel was established over 60 years ago by people who are no longer alive. The people who were forced out are also no longer alive. Are people responsible for the mistakes of their parents and grandparents (much less the mistakes of people who happen to share the same ethnicity)?
Is retaliation justified indefinitely, spanning multiple generations, irrespective of how many times property changes either in its characteristics or ownership?
Israel is unrecognisable compared to what it was pre-1948; comparable to the difference between Hong Kong in 1948 vs now.
So, if I stole your watch, then took the battery out and smashed the watch, then sold the battery to a watchmaker who put it into a new watch and sold it to a person who then gave it to a friend as a gift, would your grandchildren be justified in killing that person's grandchildren to "re-take" the watch?
Would Jews be justified in indiscriminately firing rockets at German civilians on the grounds that Germans now occupy property that was previously owned by Jews? Would you argue that a German response to such action could not be described as defensive?
All land/property can likely be traced back to an initiation of force if you go back far enough. A line has to be drawn somewhere, assuming you don't want to just throw property rights completely out the window.
A second related problem is the assumption of collective responsibility and/or collective entitlement, regarding the Jews as being equally obliged to give their land/property/homes to Arabs who are all equally entitled to it, despite hundreds of thousands of people on both sides immigrating there -- and the rest being born there -- long after Israel was founded.
I don't think the proposition that Israelis have no right to fight back makes any sense, given the above.