In an OPTIMAL NETWORK conditions,
Will a server co-located in Israel perfrom as good
as a co-located server in the US?

Same hardware, same visitors from around the world
(with a slight edge for US people).

Any idea?

Michael.

Optimal network conditions IMHO simply do not exist. Apart from physical/logical failures (a router down, a broken routing table, ...), you should always consider that there is normal network traffic (even if you forget for a moment about net congestions, which should be dealt apart)
Think to a normal city street: at 2AM is usually more empty than at 10AM! (if you do not live in a red light district! :D)

Anyway, IF you consider that you are alone in the net, IF all routers are up, IF backbones are all of the same capacity (and, surely, have the same traffic: none, you're alone, remember) and IF the server are exactly the same, then, IF you try connecting the site from many points of the world you should get the same average connect time.
But we don't live in a perfect world... too many IFs...

My opinion is that you should investigate accurately on what the two providers give and decide upon more concrete facts than speculations of optimal net conditions.
I wouldn't colocate a server in Israel (nor in Italy, where I currenly live): I would tend to prefer US lines, they are cheaper and far more reliable (at least than the ones in Italy)
Moreover, since you say you have visitors from all the world, that should be the right choice: maybe a Sweden provider does not have a good connect time to sites in Israel, but it is more likely it has good connect times to that great, great, great country :) named USA

Host... in the USA... host in the USA... (do you remember the song "Born in the USA"?)

Just my 2 cents :D