This question has drawn heated debate among Christians since the modern State of Israel was founded on May 14, 1948. Some interpret the regathering of Israel as already fulfilled by the return of Jews to Jerusalem and Judea from Babylon in fulfillment of the prophecy of Jeremiah 29:10. They would say the culmination of that regathering was the first Advent of Messiah Jesus, at which time the faithful remnant received Him and the rest were eventually driven out of the land again. The next event, then, would be the return of Messiah to set up His Kingdom, which will include the faithful remnant of Israel and the faithful Gentiles who are "grafted in" (Rom. 11:17) to be "fellow heirs" with Christ (Rom. 8:17; Gal. 3:29; Eph. 3:6). This view would not preclude another regathering of ethnic Jews to the land, but neither would it require it.
Most who hold the above view would also view the 1,000-year reign of Christ in Revelation 20:2-7 as figuratively picturing the Church Age. They as are known as a-millennialists. They hold that Christ will return to judge the world and set up His eternal kingdom in a new heaven and a new earth. A similar view is that of the post-millenialists. They are the eschatological optimists: they believe that through the ministry of the Church, the gospel will at last conquer evil and prepare the world for the return of Messiah who will establish His universal reign. In both of these views, the regathering of Israel is past, and thus there is no prophetic significance to modern Israel.
The popular Dispensational view of prophecy sees modern Israel as the fulfillment of the prophecies of Israel's regathering (Deuteronomy 30:3-4; Isaiah 43:5-7; Micah 2:12; Zephaniah 3:20, et al) before the return of Messiah to establish His Millennial Kingdom, over which Jesus will rule from the Throne of David for a literal 1,000 years. To Dispensationalists the Millennium pertains to Israel as God's "earthly people." They see two peoples of God--Israel and the Church--one earthly and one heavenly, for which God has separate purposes.
Despite my use of the third person in the very brief summaries above, I do not dismiss any of these views entirely. Each makes valid Scriptural observations which ought to be given serious thought. Still, as coherent systems, they cannot all be right. For now, I would like to point out one prophecy concerning Israel's regathering that may help us understand what God is doing in that land today.
One common objection to viewing modern Israel as a fulfillment of biblical prophecy is the belief that when God regathers Israel, they will return in belief, as a holy people who have received their Messiah. The prophecy of the Valley of the Dry Bones in Ezekiel 37:1-14 may shed light on that issue:
The hand of the LORD was upon me, and He brought me out by the Spirit of the LORD and set me down in the middle of the valley; and it was full of bones. He caused me to pass among them round about, and behold, there were very many on the surface of the valley; and lo, they were very dry. He said to me, "Son of man, can these bones live?" And I answered, "O Lord GOD, You know." Again He said to me, "Prophesy over these bones and say to them, 'O dry bones, hear the word of the LORD.' "Thus says the Lord GOD to these bones, 'Behold, I will cause breath to enter you that you may come to life. 'I will put sinews on you, make flesh grow back on you, cover you with skin and put breath in you that you may come alive; and you will know that I am the LORD.'" So I prophesied as I was commanded; and as I prophesied, there was a noise, and behold, a rattling; and the bones came together, bone to its bone. And I looked, and behold, sinews were on them, and flesh grew and skin covered them; but there was no breath in them. Then He said to me, "Prophesy to the breath, prophesy, son of man, and say to the breath, 'Thus says the Lord GOD, "Come from the four winds, O breath, and breathe on these slain, that they come to life."'" So I prophesied as He commanded me, and the breath came into them, and they came to life and stood on their feet, an exceedingly great army. Then He said to me, "Son of man, these bones are the whole house of Israel; behold, they say, 'Our bones are dried up and our hope has perished. We are completely cut off.' "Therefore prophesy and say to them, 'Thus says the Lord GOD, "Behold, I will open your graves and cause you to come up out of your graves, My people; and I will bring you into the land of Israel. "Then you will know that I am the LORD, when I have opened your graves and caused you to come up out of your graves, My people. "I will put My Spirit within you and you will come to life, and I will place you on your own land. Then you will know that I, the LORD, have spoken and done it," declares the LORD.'"
This prophecy presents a progression in Israel's regathering: first, the "bones" come together, then sinew and flesh covers them, and lastly, the spirit (Hebrew ruach, wind, breath, spirit) is given. Often in biblical prophecy, events that are far apart in time are seen prophetically as close together. Such is the case with various prophecies of Christ's first and second advents. The regathered Jews from various parts of Europe looked, sometimes literally, like dry bones, weak and helpless in a hostile land. But God granted them sinew, strength to fight for a homeland. Though they have grown stronger as a nation, they are still relatively weak in the face of the forces against them. For the most part they do not acknowledge God, much less Messiah Jesus, as their Deliverer to whom they owe their very existence. Yet there is evidence that God is breathing life into the dry bones in Israel. Response to the gospel of Jesus the Messiah is growing, and congregations are being formed.
Is all this in fulfillment of prophecy? You decide. In any case, the spiritual salvation of Jews and Arabs in that troubled region ought to motivate our prayers, not the political maneuvering of men destitute of the truth. "Pray for the peace of Jerusalem," David exhorted. "May they prosper who love you." (Psalm 122:6)