You seem to be confused about the definition of the word theocracy if you unironically consider Israel one. No, you don't seem to be - you unquestionably are considering how you argued the point.
theocracy /θɪˈɒkrəsi/ noun
a system of government in which priests rule in the name of God or a god.
you're absolutely correct. it would be more accurate to call Israel an ethnosupremacist state. For all intents and purposes, I consider the alternative terminology a reasonable substitute when looking at outcomes.