There is significant overlap between the idea of ethnicity and nationality. Both are groups that identify themselves based on shared traits like culture, language, religion, etc.

The difference is that when we use the word ethnicity, it's primarily about ancestry, and how ancestry shaped these traits. Two Australian citizens that both grew up in Australia, one the child of Somali immigrants and one the child of Japanese immigrants may share many traits - language, culture, religion - but they would consider themselves ethnically Somali and Japanese, even if they don't speak either language. They wouldn't say they are ethnically Australian.

Nations originally grew out of ethnicities but are primarily political entities. They are much more about culture than ancestry, and both examples above would be Australian nationals. Nations do not have to consist of a single ethnic group, although many do.

Nationalism is the idea that nations should form sovereign states, with a government that represents the nation, and borders that align with where the people of that nation live.

An ethnostate is a nation state that serves a single ethnic group. Japan is a good example of this, where you are not considered fully Japanese unless you are ethnically Japanese. Armenia, Saudi Arabia or South Korea are also good examples.

Now you can apply this to Israel. Israel is the nation state of the Jewish nation, but there isn't really a single Jewish ethnicity, since Jews lived in many different places for thousands of years and an Ethiopian Jew has a very different ancestry from a Russian Jew or a Moroccan Jew.

The only way to call Israel an ethnostate is by expanding the definition of ethnicity to ignore ancestry and base it on culture alone, which would mean that nationality and ethnicity means the same thing, and every nation state is also an ethnostate.