As much as I'd personally love for an AWS region to be built in Israel, the fact of the matter is, Israel is a poor development target for AWS.

* Biggest problem is that Israel is an Internet cul-de-sac - there aren't any overland Internet links to Arab countries because of politics. Which means that the only people who are going to get great pings are Israelis.

* Sure, there are a ton of Israeli tech companies, but if they're going to spin up instances in an Israeli region, they're going to be low-traffic/requirement dev instances. Production instances are going to be located close to customers, and almost no Israeli tech companies sell to the tiny local market.

* Israeli customs infrastructure has a long way to go before it's probably reliable enough for Amazon to risk investment. Imagine a vital shipment of server hardware getting held up at Ashdod because Histadrut went on strike.... shudder

I refuse to believe that the bean counters at Amazon are ignorant - they've more probably come to the conclusion that it's just not profitable.