This Israel was founded in 1948, after the Brits decided to give control of Palestine to the United Nations. The collaboration of the Arabs with the nazis didn't make many people in the West sympathize with them, and so, it's decided to give the Jews all of Palestine including Gaza. Most Arabs left the country, settled in Egypt or Transjordan, which became the republic of Jordan in the same year. As revenge for the loss of Palestine, the Arabs kicked out the Jews from their countries. Israel ended up with a higher population than OTL (more than one million people more) and has a better strategic position for the future.

Country from Hitler's Mediterranean Strategy TL