Not because Israel cannot, but WILL NOT. And everyone knows it.
If you want to get into the current understanding of the rules and conduct of war, then terrorism is about getting straight to the will to fight and not confronting the ability to fight. The current rules and conduct of war expects the opposite, meaning it is army vs army. After the mass destruction, including nuclear, and horror of WW II, there is a tacit understanding that if an army is losing, its civilian leadership would do everything possible to avoid the wining army reaching the civilians, and once that is evident, there is a losing country of that war.
Now, whether any country is willing to abide by that formula, we have yet to see.