It's not Israel. Security clearances, especially high-security clearances are often not given when the subject has relatives living in countries outside of the US.
Similarly, a long period of living in another country can cause denial of a security clearance.
One of the problems is the risk of a foreign relative being held hostage as a means of accessing information. Also, during security clearance investigations, lots of people are interviewed. Tough to interview folks in another country.
It's not limited to Israel, quite frankly.
"Security clearances, especially high-security clearances are often not given when the subject has relatives living in countries outside of the US."
Where did you find this information?
This is a standard question asked of ex-nationals of a particular country when obtaining a TS security clearance. Insight may be guilty of a 'drive by shooting' here.
Let's hope that this is the case - that it is SOP and that Insight was guilty of not telling the whole truth.
Interesting parallel. In good old Soviet Union, if you had relatives abroad, you were tainted and were barred from some occupations.