Yes, God created Israel to be a model for the nations. This is an example of what happens when a nation turns against God. They may maintain God as a religious image, or relic. But in terms of recognizing His character and who He really is, the Jews show by their rejection of Christ that they are really just serving themselves, their own people, and their own traditions.
As a result, Israel has not had God stand behind them for centuries, except to keep them alive, and their hope alive. The object has been to show that God remains merciful and continues to be true to His plan. In the midst of all of this hate and competition among nations, God has kept a Christian light among the Jews. And when Christ returns he will end the conflict.