Quote from article, Haaretz: Sources: American Airlines dropped Israel route to deepen ties with Arab carriers
That's what it says. But I don't believe it because it because the explanation doesn't make any sense. "Source in the aviation industry" could be someone with an axe to grind, like a US Airways employee in Tel Aviv or a competitor throwing mud.
American made the decision due to the OneWorld global alliance, whose members include Arab carriers like Qatar Airways and Royal Jordanian and the carrier of the Muslim-majority Asian country Malaysia, asserted the source.
RJ flies to TLV, AA is moving closer to non-alliance EY than QR nowadays, and MH has quite a bit on their plate higher priority than whether a OW partner flies PHL-TLV. Where's the so called pressure to drop TLV on BA, IB, AB, RJ? By the way, EY owns 30% of AB, and doesn't seem to care whether they fly to TLV.