Got a ride from an isreali monit driver this Thursday and asked him this very question,he told me that he personally thinks it's a disgusting rude thing, it's invading his personal space, as he explained that he's used to having space and room next to him, not having to drive with both arms stuffed to one side to avoid hitting the passenger.
And offering the passenger the whole back to have his own personal space but then he comes to sit in the front he found to be very un-polite,
Doubt you will hear this response from every taxi(monit) driver as the real Israelis enjoy having company and couldn't give a hoot as long as their making money.