“The Muslims have never objected to Jews living Torah-based lives” This is errant nonsense. Rambam wrote “Iggeret HaShmad” in the wake of forced conversions of Jews in Morocco. In Yemen fatherless Jewish children under thirteen were forceably placed in Moslem homes to be raised as Moslems (unless they were married – which is why girls whose fathers died r”l were quickly married off by their families). There were also forced conversions in Bukhara and Persia, among other places.
We have a mitzva to conquer EY (Ramban, Sefer HaMitzvot, Mitzvot that Rambam “forgot”). Having a flag, a government, etc. is critical. As for the Islamic world’d ability to wage war, the Zohar says at the end of parashat Balak that they and the Western world will destroy each other and then Mashiach will come.