Statement-I is correct because Israel has indeed established diplomatic relations with several Arab states, notably with Egypt and Jordan, and more recently through the Abraham Accords with the United Arab Emirates, Bahrain, Sudan, and Morocco. On the other hand, Statement-II is incorrect because the Arab Peace Initiative proposed by Saudi Arabia in 2002 was not directly signed by Israel and the Arab League; rather, it was a proposal for normalizing relations in exchange for the establishment of a Palestinian state. This distinction highlights the complexities of Middle Eastern diplomacy and the evolving nature of Israel-Arab relations, emphasizing the importance of recognizing formal agreements versus initiatives or proposals that aim at conflict resolution.