Well, I think you’ll find that this is something coming from the labor wing of the Israeli government and unlikely to be pushed by Bibi. Not to mention unlikely to be endorsed by the “palestinians”. Just another timeburner.
If I was Israel, I would go with one of two options for future planes:
1. The Japanese/SK 6th generation program.
2. A “cheap” european fighter and add their own active stealth.
Of course, there’s a third option as well - the Indian/Russian way.
No, the Israeli appetite for F-35 is great. They have their plans for the jet