The article linked below is not a very good defense of Israel as a Jewish state. I think it can be stated much more simply.
Is the idea of an official religion for a nation-state consistent with pure liberal democracy (libertarian values)?
I think the answer is definitely "no." (Of course, the whole idea of a nation-state may not be consistent with this ideal anyway. Libertarians don't like the idea of any collectives, like "nation." But they exist nevertheless.) Hence America, and some other liberal democracies, strive mightily to strike a neutral position on religion - making it a matter of private choice and practice as long as their adherents do not act coercively.
But this option is simply not on the table in the Middle East. Without exception every nation-state in the Middle East has an official religion, and except for Israel it is Islam. And, in every respect, without exception, Israel is closer to the liberal democratic ideal than any of its neighbors and enemies - the gap is enormous. To push a "peace-process" that results in a single, secular Israel-Palestinian state, is, as a practical matter, to place all of the Jews in Israel, (and many around the world) in grave danger.
There is ample evidence to indicate that this is no mere pretext. It is an essential part of Israel's character (as a nation, a set of institutional and cultural practices) that it has been, and continues to be, a safe-haven and a guardian for Jews everywhere. The vast majority of Jews now living in Israel came there, or descend from relatives who came there, from places where they were persecuted, often fleeing for their very lives. This is not a mere donning of the posture of victimhood, so common among other minorities, for political reasons. Israel asks for nothing except to be left alone in its tiny piece of real estate. It can fend for itself. It needs no "affirmative action."
Before we self-righteously push for a "peace-process" that results in a secular, Israel-Palestine, or even a secular Israel, we should demand the secularization and democratization of Egypt, Syria, Jordan, Lebanon, Saudi Arabia and the rest of them.
In The Wall Street Journal, Douglas J. Feith of the Hudson Institute writes that many nations have laws and practices that recognize their majority group's history, language or religion while also protecting the rights of minorities.