I don't condone this law, but I think people here are missing an opportunity for understanding. I see so much black-vs-white moral righteousness on HN lately when really, the world is a sea of grey. And understanding a thing does not mean agreeing with a thing. But a little empathy might soften the inflammatory rhetoric.
Israel is proud of their Jewish heritage, and are generally surrounded by millions of people from other ethnic and religious backgrounds who hate them. I mean, it is very common to hear people in countries near Israel openly calling for death to the Jews or destruction of the Jewish state (essentially advocating genocide). Hell, I remember tweets from the Ayatollah promoting violence against Israel, and Twitter just let it fly.
In light of all the historical context and current geographical situation, I can understand the motivation to have a law like this. Whether it's morally just, effective, or just openly racist is certainly up for debate, but to me it is not so clear-cut as others would say.