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I disagree, Israeli does not sound like a name, at all. It's like naming someone American or Japanese. It's the common term for citizens of the state of Israel, and I've never seen it used as a name. Maybe if you had never heard any people referred to as Israelis, you might think it sounded sort of namey - but you might think that about American or Japanese, too.

That's totally subjective. To me, Israeli sounds no more a name than Londoner *shrug*