Nobody but the Palestinians seems to seriously dispute that the West Jerusalem is Israeli, so if the Israelis want foreign embassies to locate in West Jerusalem how is this an issue? I know the Palestinian leadership continues to rabble rouse by proclaiming all of Jerusalem as soon to be the capital of Palestine but that's simply nonsensical.
Technically the entire Arab League does as this is part and parcel of the issue of rejecting the notion of a Jewish state of Israel. Its about Islam the religion which at the present time is interpreted by all Muslim nations of the Middle East as prohibiting any non Muslim from owning land anywhere in the world not just the Middle East.
Its also compounded by the spineless UN which placates this religious bigotry to placate its oil supplies.