Israel is a bad example to use, because of the cultural influence of European Jews who moved to occupy Palestine and brought European values of the importance of academic research to Israeli society.
A far better comparison is India. 70 years ago, under colonial rule, Muslim and Indian societies were on par with regards to not just intellectual development of society, but also economically.
Yet scientific research today is considerably more advanced in India (and I'm referring to work done by Indian scientists, educated in India who have rarely left India) than in the Muslim world. For instance, I came across news reports yesterday of research done in India that may lead to an injection-less way of delivering insulin.
As many in this thread have suggested, it is the fact that there is less money in academic research than in other fields that the educated can go into that drives this. Muslim societies are concerned with individual accumulation of wealth, it seems, more so than Indian society is (where being highly educated is increasingly more and more valued, though eing wealthy is obviously also appreciated).
There is probably a whole wealth of sociological research than can be done on the reasons for this, but my leading theory is that in most Muslim societies, economic growth has been stagnant and thus people are more concerned with accumulating as much wealth as possible. This translates into social pressures and expectations to study and work in lucrative fields. In India, economic growth has meant that Indians are more willing to go into less lucrative fields, such as research, where you can build prestige through your knowledge.
One could be tempted to make the argument that India's been a democracy fostered research, but this is countered by the scientific advances made in the totalitarian USSR between 1945 and 1990 in particular (ie after the Soviets industrialised).
The scientific advances in the Muslim past occured during period of great economic power for Muslim societies. Wealth fosters research. Armughal has first hand experience of this.
For the Muslim world to catch up scientifically will take a period of hundreds of years, just as we declined over hundreds of years. We'll need generations of competent leadership (lacking, with just a handful of leaders being the exception) who can take advantage of globalisation to grow national economies, create wealth, and thus break the overriding drive for wealth and instead foster intellectualism.