The man is not a diplomat, he is not a politcian he is a religious figure and private citizen. Whilst it might not be the cleverest remark to make it is his right to express his opinion even if its not politically correct. A state where your censored so your only allowed to say whats politically correct and not hurt anybodies feelings then its no different from a state where freedom of speech is not allowed full stop. In reality he hurts nobody but himself because this will have no impact at all on the political process. Ovadia Yosef has always been outspoken and said things that are non politically correct on a whole range of subjects this is just the latest.
Man shot dead in northern Israel town of Bi'ina, police say the murder was gang related (Haaretz)
from the article: U.S.: Rabbi's 'offensive' remarks harm peace efforts