I don't even understand what types of escalation you're talking about. Israel has peace aggreements with all its neighbourhood countries, and Israel being a nuclear power hasn't changed a thing for terrorist organisation which have attacked israel for the last 30 years.

All the trouble in the region comes from non-national entities, or state-sponsored terrorist organisations ( with daesh being a weird hybrid of the two). Letting iran have the nuclear bomb will only push conflicts toward even more terrorism, especially between shiite and sunnites.