I've always wanted to know what's so strategically significant about Israel that the US finds so important?
Okay, the full explanation is a bit long, so bear with me (BTW, if you understand the concept of Petro Dollar, you can skip a few paragraphs):
The first concept we need to cover is the modern concept of currency. Unlike the ancient times, modern currency is not based on valuable metal. This means the currency itself has no economic value and their value comes from credit of the publisher of the currency. Now, this "credit" isn't something like good reputation, niceness, etc. The creditability of a currency comes from the assumption that by using this currency, you can purchase the material you require, be it food, ore, machines or energy products like petroleum. Let's have an example of how this works, say country A produces milk and sells it to other countries. Country A also requires ten baskets of eggs and need to buy it from somewhere else. Country B says "Hey, can I give you this promise notes that I wrote for your milk? You can use the note to eggs from me." Country B has lots of hens, so Country A knows country B has eggs and he can use the note to get eggs. As a result, country A accept the promise notes, which is known as currency. Now, in order for country A to keep accepting currency from country B, country B has to keep a large numbers of hens, because otherwise country B's ability to provide the eggs are put in doubt and the promise note lose its value. This is known as the most basic form of currency depreciation. (There are many more complicated case, but it will take too much time to cover them here)
The next concept we are going to cover is Petro Dollar or more specific, United Dollar which the credibility of the currency is backed up by the assumption that using USD allows the buyer to purchase petroleum. USA became the largest industrial nation on the planet in 1895. In the 115 years following that, USA produces the more consumer goods than any other country in the world until China took the title as the largest industrial nation in 2010. Basically, people gradually started to use USD as global currency after 1900 because it was understand that by using USD, they can buy the products they need. This is especially true in WWI where US provided war material for the European nations. After WWII, European nations are in tatters and with the only other major industrial nation (USSR) on the other side of the iron curtain, US is by far the largest industrial power in the western world and its currency become the dominant currency in the trade network. (It is more complicated than that, but that's the gist of it)
Now, the system back in the day is known as the gold standard. Basically, currency is backup by the gold reserve of the nation which is in turn backed up by trading of the physical goods, ie, industrial products. However, as US financial system continue to develop, it begin to outpace the growth of its industrial production. Basically, the goods produced by US industry is no longer sufficient to back up the value of the US currency. So one of the fundamental change Reagan made to the US financial system is moving away from gold standard and instead to today's credit base system. This decoupled the currency with physical goods and allows additional currencies to be published even though the country doesn't the physical goods to back it up. However, even under the new system, the currency still fundamentally require something to guarantee its value and petroleum being the life blood of modern industry, is this guarantee.
Don't get me wrong, US is a large country and has quite a bit petroleum reserves, but it is by no means the largest petroleum reserve in the world and in fact, not even the top 10. This is where middle east comes in. Middle East collectively contains very large reserves and if this petroleum supply can be used to guarantee the credibility of dollar, then it will stay up nicely even without support from US industry. However, there is a problem. Middle Eastern nations are not US colonies. They are not US neighbors and while militarily weaker than US, actual annexation is not possible due to the presence of other major nations and the sheer distance. So what is the solution? The answer is Israel.
Israel is NOT set up by US. The actual independence of Israel is facilitated by the British empire, though it is perfectly possible that the British has similar things in mind. In fact, Israel, from the start up, is setup similar to Pakistan and India. The goal is simple, by inserting a state by completely different religious and ethnicity group into a region that is mainly dominated by another religion and racial group. The result is essentially a perpetual conflict between these states and preventing all chance for peace and unity. This conflict also serves to weaken both parties and forces them to depend on foreign powers to maintain the status quo. Indeed, after the founding of Israel, it immediately caused large number of conflicts between a Jewish/Judaism states and the neighboring Arabic/Islamic states. Due to its small size, Israel is entirely dependent on western aid to survive. The Islamic states really didn't come off the ordeal any better. In order to compete with an Israel armed with US/European weapons, the other middle eastern states are also forced to depend on foreign powers to survive. Perhaps the most significant event among all these is Nixon's deal in 1971 with Saudi Arabia. Which Saudi Arabia agrees to settle business only using US dollar in exchange for US weapons and protection. (That's another long story, with additional deals with China, Pakistan and a number of intermediate range ballistic missile and rumored nuclear warheads, sufficient to say there is a reason Saudi Arabia has enjoyed a long period of peace after the 70s).
I am getting a bit off topic, but the gist of the story is that Israel's strategic significance in middle east is that it is a rather sharp thorn to the Middle Eastern nations. It is
made tough enough that middle eastern countries can't pull it out and
made painful enough that middle eastern country can't move away from the drug that dulls the pain (using US dollar). There is speculation that the true reason behind the 2003 Iraq invasion is that Iraq is trying to switch from petrodollar to Euro. The same thing applies to Mubarak of Egypt who tried to form an African economy zone with its own currency. Of course, Iran's sanction is quite understandable because after the destruction of Iraq in the first gulf war, it is pretty much the only industrial nation left in the Middle East that is strong enough to move away from USD.