Israel is not concerned about nuclear competition from Iran. If they did they'd be lobbying other nations as well. But you are right about the nuclear fallout - if would harm not only Israelis but Muslims as well. And if Iran ever attacked Israel with nukes the Iranian nation would cease to exist. Israel would see to it. Dimona is not a myth.
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Clashes between IDF and Palestinians in Joseph's Tomb after Jews pray at site; none hurt (Haaretz)
from the article: Clinton: The Middle East must be freed of nuclear weapons