What is the reason for the disbelievers' envy of Muslims for their faith and their not following the religion of Islam, and does the command in His (the Most High) saying: (So pardon and overlook) refer to the People of the Book?

The People of the Book envied the believers for the religion of Islam and the advent of Prophet Muhammad (peace be upon him), because they believed he would be sent from among the Jews. When it became clear that this was not the case, they envied the Muslims for their religion and became obstinate, refusing to follow it, despite their conviction that it was the truth. The noble verse: ﴿Many of the People of the Scripture wish they could turn you back to disbelief after your belief, out of envy from themselves, after the truth has become clear to them. So pardon and overlook until Allah brings His command. Indeed, Allah is over all things competent.﴾ [Al-Baqarah: 109] clarifies that their wish stemmed from envy after the truth had become clear to them. Allah commanded the believers to pardon and overlook them until Allah brings His command, granting permission to fight them when the believers possess strength.