When European Jews took over Palestine, they were stateless. Israel and Israelis were non-existent at the time. So, Palestinians called them Yahood meaning “Jews.” Because what else would you call a stateless people aside from their ethnicity. And yes Judaism is a race/ethnicity.

Anyway point being, people still haven’t properly adjusted their language when referencing Israelis to say Israeli. My mom says “Yil3n el Yahood” a lot and it translates to “Curse the Jews.” Growing up I always understood it as Israelis, because when I asked she would say its the people who took over Palestine. People’s language just hasn’t adjusted to say Israeli instead of Jewish.