I've been doing reading on the Arab-Israeli conflict and the oil embargo, and many different writings mention that one of the political goals of these states was to "alter the status of Jerusalem". I have been able to find plenty of literature on the other major goal (To alter Israeli policy to return territories captured in the 1967 war to grant the “legitimate rights” of the Palestinians) but can't seem to find much in the way of the former.
Well, it falls essentially under the clause of "return territories captured in the 1967 war". The Arab states (particularly Jordan) had lost control of east Jerusalem in the 1967 war, when they also lost the West Bank, Gaza, and the Sinai. Until then, Jerusalem had been more or less a divided city. I can't think of any other meaning for the statement besides to alter it from an Israeli-held city to an Arab-held one, controlled and under the sovereign authority of Muslims; especially since so many of the holy sites were contested (think of the Western Wall Riots in 1929, sparked by rumors that the Jews were trying to take control of the wall by force).
If you cite where you've read this I might be able to shed further context :).