It is not unusual for the nation and the state to be in conflct with each other. The role of the monarch, in principle, was to reconcile the nation with the state.
With the modern era’s overthrow of the monarchy and the advent of popular sovereignty the administration of the state became a struggle between the ruling and the subject classes. What ended up holding together the interests of the state was a sense of unity that came from a common national origin.
When people talk about a Jewish State they are playing with this tension between (natural) Jewish nationalism, on the one hand, and a state apparatus of all (legal) Israeli citizens, on the other.
When YHWH is the monarch, the matter reverts to the monarchical original solution.