As much as I do not want Genocide, and the Israelis probably oppose it due to not-too-distant history, this has the potential to get real ugly.
Israel is like a cornered dog. In the olden days they have fled(or been forcibly moved), but I do not see that happenign. Small events, like a bombing, the dog growls. Kidnap soldier, dog snaps. Maybe draws a little blood.
In the past, the dog when pushed hard enogh grabbed hold, chewed them up a bit and went back. Sometimes with a bit of breathing room (Golan, Gaza, West Bank).
If they kick the dog, or worse, (think WMD of one form or another) the dog will go for the throat. Maybe they kill the dog. Maybe not. Either way, it will not be pretty.
If the terrorist use nukes, god help them. Because I think Israel will. Not as a preemptive (they will conventionally strike first, like Osirak) but as a last ditch effort.
I fully believe that if Israel were about to be pushed into the sea, they would not hesitate to use nuclear weapons. It has been shown in the past that they were willing to use them, and almost did.