Abraham was who the original covenant in the Old Testament was made. Thus the Jews see that before Abraham, they were not "chosen" as of yet and thus not Jews. Interestingly enough, the Muslims view that convenant as being with Allah and was passed not to Isaac, but to Ishmael, which means god hears, and thus god chose them. So the fundamental split comes at the interpretation of what they consider their history where Jews become Jews and Muslims become Muslims.