I see Israel as trying to live with the Arabs, and the Arabs intention is to live without Israel. Israel has the capability to use Nukes, but I don't believe that is their intention, but only as a weapon of last resort for survival.
Kind of like we are with our guns. We don't intend to use them on our fellow man, but if he invades our home with the intention to harm us and our families, and our security defence systems don't stop him, and the door bolts don't discourage him, we'll use those weapons as our last resort for survival.