There have been public reports by major news organizations on the subject of Israel using big tech companies to surveil the West Bank and Gaza, for a decade. This isn't an issue of customer privacy.
The difference is that pre-2023 it could at least have some plausible excuse of trying to detect terrorist activity. With Israel's current actions in Gaza, there is no longer any plausible excuse or defense for any security action Israel is conducting towards Palestinians.
Israel has a legitimate reason to want to try to intercept and detect terrorist activity, but given what they've been doing in Gaza for the past year and a half, they simply can't be trusted. They've lost all credibility and benefit of the doubt. So they can't expect other entities to help them do something they say is legitimate, because no one can trust them to do something in a legitimate and ethical way.
I think OP’s point is Israel’s legitimate surveillance needs have risen alongside their credibility crashing. This isn’t a simply reduced problem unless one has a horse in the race.
I understand that, and I am sympathetic to those needs to some degree. They do have increased legitimate surveillance needs. But they've lost all of their good will. Partnering with them is too morally and PR-ily hazardous.
I am not saying Israel is nearly as bad as Nazi Germany, but I think this argument is overall kind of pointless because one could easily have said that Nazi Germany had greatly increased legitimate surveillance needs after they invaded Poland.