how come Israel is in the European league?
Very good question... especially considering the Geography.
My uneducated guess would be that it's a political compromise born of necessity. The other logical option would have been to put them in the Asia group, but considering what occured in Munich in 1972 it would seem to make sense to not expose Israeli athletes to unnecessary danger by sending them to Arab countries and vice versa. Just to illustrate, some of the countries in "Asia" include: Iran, Iraq, Saudi Arabia, Yemen, Lebanon, Palestine, Bahrain, Kuwait... Syria.
Not very palatable options.