Until the Islamic revolution Israel and Iran were the best friends in the Middle East, long after Israel conquered the West Bank and Gaza (1967 vs 1979). It's not the Palestinians that are the issue here, rather an excuse by Iran to constantly attack Israel and rally their population around a cause.
1967 is Iran ruled by monarchy forced on it by USA and UK. Hated by general population as something forced on them from abroad.
Shah stance being aligned with the people who put him in for their own benefit is like Venezuela paying oil to trump now.
Irani people's relations soured when Israel was recognized as the long arm of US and Britain's meddlesome interest, and if course the treatment of the Palestinians. Shah's personal feelings was a different matter.