It goes both ways, but I'd say it is more driven by the value of Israel's economy rather than the other way around. Of course you have to consider that Israel's defense sector is also part of their economic dynamism.

Big picture here is my take. Since 1948 there have been conservatives in Israel such as Ariel Sharon and Benjamin Netanyahu who have had a policy of ethnic cleansing in that they cannot tolerate there being a non-Jewish part of the polity which is large enough to have political power. The plan has elements such as (a) dividing the population into different fragments such as the West Bank, Gaza and Arab Israelis that don't work together, (b) developing occasional crises that result in the killing or expulsion of large numbers of Palestinians, (c) most of all making sure that the Palestinians do not develop effective leadership, economic connections, soft power, etc. The destruction of academic organizations is critical to this plan because they don't want Palestinians to succeed the way that Jewish people have, instead they want ignorant stupid and desperate Palestinians to make bad moves such as the attacks last year, Munich, numerous 1970s airplane hijackings, the attempt to take over Jordan and such which justifies their persecution in the minds of Israelis and many others

I had a harrowing conversation with a Jewish mathematician about 15 years ago where he explained that it wasn't genocide because the Palestinians were not "a people" which at the time my answer was "boy you sure sound like the leader of Germany from 1933 to 1945" but I've chewed on and have an interpretation of:

Say the remnants of the Iroquois contacted aliens or got some machine like Drexler talked about and decided, now that they had the means, they wanted to take back New York. Are the people who live in the boundaries of New York really a "people" or "nation" or they are just people who live in a certain boundary? (Certainly you find every kind of white, black, Asian and indigenous person from absolutely everywhere here.)

The Ottoman empire despite claiming to be a Caliphate was actually very cosmopolitan and all sorts of people could live everywhere in much of the middle east (a Jewish friend had family that came from Iraq!) so they can make the case that the pre 1948 population of Palestine was just a bunch of randos like us New Yorkers.

Genocide is a crime on top of mass murder because of not just the harm to those killed or the trauma to the survivors and children of the survivors who recapitulate the crime 80 years later, but also the the whole world in the sense that the extinction of a species is a loss to the whole world. Germany is worse off today because of the holocaust because of all the things that aren't there and all of the richness that Jewish people brought to Germany that was lost. (20 years ago I could not find a good bagel shop wherever I went in Germany!)

It's a technicality whether it is genocide or just mass murder in my mind, but it's a good line to get into mind of people like Netanyahu who are thinking ahead hundreds or thousands of years with events like

https://en.wikipedia.org/wiki/Jewish_diaspora

as clear in their minds as if they happened yesterday. On a bad day I think the polities of liberal democracies are like children in the hands of gods when it comes to facing those kind of people as our politicians often seem to be thinking two or three days ahead, at most to the next election and we are so self-centered and focused on stupid little things like the price of eggs that they can do what they want with us.

On the other hand there are so many positive things about Israel and Israelis but they cannot find it within themselves to constrain Netanyahu and they are paying a price for it now and will continue to pay a price for it. It is likely that if Netanyahu's program succeeds they'll face a crisis of meaning when they no longer have an enemy and they might lose their culture in just a few generations and at best continue start the cycle of losing their way and getting dispossessed which is repeated several times in the Old Testament and in history.