I believe that would be possible if the world community accepted Israel to grow whenever they were attacked by their neighbours. It might even lead to less restlessness in the area, if unrests weren't rewarded with weakening Israel. On the other hand, there might be more nationalism - like in Turkey or Germany when they were beaten in wars and had to give up territory. But it doesn't appear to me as if that would be much of a change to todays world, except that there might be slightly fewer suicide bombers.
If they had avoided a few bad economic decisions, Israel might even have become strong enough to treat surrounding nations as satellite states - Lebanon, Syria, and Jordania would be "influenced" strongly by Israel, while Egypt would probably be too big for that. That might also help Israel solve some of the problems fuelling unrest in the area - Palestinian refugees could be integrated fully into the Jordanian economy, making even more Palestinians follow; Lebanon could be integrated into Israel more and more, making Israel more cosmopolitan and giving it road access to Europe; and more.
The question is, whether so much power would corrupt Israel into treating the whole area like the West Bank - or whether it would lead to uneasy cooperation similar to the former Warsaw Pact, but with increasing ties and in the long term even understanding and independence without war, and with lots of problems solved.