Israel competing in European competitions is strictly due to politics and exclusion of Israel from Asia.
It was not a decision that was made by Israel.
Previously, Israel competed in Asian competitions and the Asian Games from 1954 to 1974.
However, in 1962 Indonesia, the host country banned both Israel (religious reasons) and Republic of China/Taiwan (political reasons) as a result the IOC stepped (they previously sponsored the Asian Games) and terminated Indonesia as a member of the IOC and Indonesia was banned from the 1964 Olympics.
Then in 1978, Thailand hosted the Asian Games, Israel was banned for political reasons.
Then in 1982, Israel was banned permanently on the grounds that the Asian Olympic Council (formerly Asian Games Federation) felt that Israel was too much of a security risk due to Israel’s conflict with various Asian countries. So the conclusion was to exclude Israel from Asia.
Europe invited Israel to European competitions in 1989 and in 1990 became a full member of the European Olympic Council. They also began competing in the World Cup qualifiers as part of the UEFA in 1994.
Israel had been invited to compete at the EuroVision competition since 1973. So their inclusion likely has other rationale, unlike the sports options, which were inclusion due to being excluded from Asia.