I'm sorry but this is pure racism. You can't ban something because it contains a person of a given nationality, regardless of the politics. This is not a stand against the nation of Israel it's a racist attack on someone's nationality.
You can, even if you shouldn't, but that's not what is going on here.
Blocking commercial acts that financially benefit an individual who was a member of an armed group while that armed group engaged in a war with your country, or a friendly one, or (in your countries estimation) terrorist acts against a civilian population is both not inherently racist and absolutely routine for countries to do.