I think that from 1996 onwards Israel would be even more nervous than usual and would be very blunt in its dealings with its immediate neighbours (ie "make one wrong move toward us and we will end you"). Because let's face it, Israel's neighbours are all going to be either under martial law, in states of civil war or under the control of Islamo-fascists and I expect they will all be biding their time until they think they can get away with attacking Israel. Certainly WWIII isn't going to make hostilities against Israel less likely.
I think once the nukes start to fly Israel would be even less likely to show restraint. Depending on the method of the nuke's delivery I would definitely list Israel as one of the possible suspects in the destruction of the Aswan Dam. The Israeli forces listed in the RDF Sourcebook would have been sent to ensure that the US and Israel's other powerful western allies were still on their side.
I find it a bit odd that Israel wasn't mentioned as being nuked in any of the T2K canon. One or two even quite modest nukes would put a massive dent in Israel being a high-tech nation or a military power. I guess they got lucky.
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 "It is better to be feared than loved" - Nicolo Machiavelli
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