Why is it OK to bring liquids through Tel Aviv airport?

"And if not":
It is not a security risk, it is not as easy as just pouring two liquids together.

"why do so many other countries restrict it?":
Because it is security theater and makes lot's of people feel more secure and that is what is important.

Also see:
Beyond Security Theater by Bruce Schneier.

Similar to Duck and Cover from the early 50's. In school they had us drill on closing the venetian blinds and getting under our desks. It made us feel more secure.

TSA fails most tests by ABC News.

If bringing more than a tiny amount of liquids onboard is such a security risk, why does Israel allow it?

It effectively isn't.

And if not, why do so many other countries (including the US and the EU) restrict it?

As far as I can tell - this is Security Theater. Attacks happen, then politicians, various public commentators, insurance companies etc. clamor for something to be done! Surely we cannot just let terrorists attack us, can we? So, they institute some measure, some check, some restriction. Maybe it even has to do with actual past attacks. Will it prevent future ones? Well, it hasn't really - certainly not attacks in airports. But the public can rest assured that the security establishment is ever vigilant!

If it makes you suffer, it must be secure.

Israeli airport security will let you, without any trouble, bring any amount of liquids, more or less, onboard

Well, in Israel, the security checks were already quite a hassle before the liquid restrictions, i.e. before 2000 - often with long lines, ethnic profiling, bag openings and inspections etc. Thus the need did not arise to add yet another measure to satisfy that maxim.

Secure cockpits and public awareness are the only important security measure introduced since 9/11. Nowadays terrorists can still attempt to assault the crew but they'll soon find themselves facing two major problems:

1. One can no longer get into the cockpit, so hijacking the plane is pretty much impossible. The pilots will immediately commence descent to the closest airport and a SWAT team will be waiting on the ground as soon as they land.
2. Every single passenger on board will try do whatever is in their power to save themselves from imminent death, similar to what happened on UA flight 93. The terrorists would be lucky to get out of the plane alive, let alone manage to hijack it.

Every other modern security measure is a complete waste of everyone's time. No fly lists, bans on liquids, shoe removals, air marshals, etc, are just a security theater paid for by taxpayers worldwide.

In contrast with what's happening in the West, Israel (and a couple of other countries like Japan) have managed to maintain a cool head since 2001. Only measures which have been proven to work are deployed at Israeli airports and restrictions on water bottles are not one of them.