I've never felt that Israel had any particular reason to kill Arafat at that time. However perhaps it happened like this. His wife, who had long been in Israel's pay, told the Israelis' "I can't stand that old bastard any longer. He stinks like a chimney and looks like a zombie. If you don't help me kill him, I'll tell the Yanks that you and he have been colluding for years to create crises to screw them out of evermore foreign aid." So the Israelis gave her the polonium, and told her to make sure there was no autopsy. The stuff would decay and, if she delayed everything long enough, no one would ever be able to tell what had happened. Then the lets-get-Israel brigade put the pressure on the Palestinian elite, "If you don't prove that Israel did it, we'll make sure everyone blames you." So Arafat's associates told his wife, "If you don't start the ball rolling, we'll point out you're the prime suspect." So the investigation was carried out and the pre-determined guilt of Israel was deemed proven. And it will no doubt go on from there. In reality, of course, there is insufficient evidence to come to any conclusion about anything.
PM postpones Israel-Germany summit marking 50 years of diplomatic ties (Haaretz)