This alarm is heightened by Egypt's inability to crack down on the swelling jihadist organization in the vast wasteland that stretches to the Suez Canal in the east and the Red Sea in the south as the newly empowered Muslim Brotherhood struggles to consolidate control in Cairo.
The animosity of Egyptian President Mohammed Morsi, a veteran Muslim Brotherhood leader, toward the Jewish state, and the growing dangers Israeli commanders perceive in Sinai have heightened fears that Israel's historic 1979 peace treaty with Egypt is in peril.
If the peace pact, the first between Israel and its Arab foes, does collapse, the geostrategic consequences for the Jewish state, and beyond, could be immense when added to the danger of an Islamist regime emerging in war-torn Syria to the north.
On Tuesday, the Israeli military said that Haitham Masshal, 24, was killed in an airstrike in the northern Gaza Strip as he rode his motorcycle.
It was the first assassination carried out by the Israelis since an Egyptian-brokered cease-fire ended eight days of fighting in November, largely between Israeli warplanes and Palestinian rocket units.
The military said Masshal was a "global jihad-affiliate terrorist" who took part in an April 17 rocket attack on the resort city of Eilat on the Gulf of Aqaba in southern Israel.
Two rockets were fired from Sinai but caused no casualties and minor damage. The attack was claimed by the Mujahedeen Shura Council in the Environs of Jerusalem.
That's a jihadist group affiliated with al-Qaida that emerged in Sinai amid the lawlessness triggered by the Feb. 11, 2011, fall of longtime Egyptian dictator Hosni Mubarak in a pro-democracy revolution.
The army said Masshal had worked "with all of the terror organizations in the Gaza Strip and over the past few years has been a key terror figure specializing in rockets and explosive devices."
During Masshal's funeral, his coffin was draped in the al-Qaida's black flag.
The MSC, an amalgam of several militant cells, acknowledged in a statement that Masshal, aka Abu Zaid, was a member of that organization and had formerly had a senior position in the al-Qassam Brigades of Hamas, the fundamentalist group that has ruled Gaza since June 2007.
MSC leaders and other jihadist groups are reported to funneling large amounts of weapons, mostly from Libya, into Sinai despite lackluster Egyptian efforts to halt the traffic.
In recent months, the Israelis have targeted other jihadist chieftains in Gaza.
On Oct. 7, 2012, Talaat Halil Mohamemd Jarbi, ar "global jihad operator," and senior MSC official Abdullah Hassan Maqawai were killed in an airstrike.
Six days later, another raid killed Abu al-Walid al-Maqdisi, former emir of the Tawhis and Jihad Group in Jerusalem, and Ashraf al-Sabah. Both identified as MSC leaders.
The Israelis are looking with growing dismay at Morsi's barely concealed hostility toward the Jewish state.
This is becoming a problem but Morsi cannot openly act against Israel, despite the antipathy of most of Egypt's 82 million people toward the 1979 treaty, which they consider a humiliation.
But Morsi's held in check because of international pressure, particularly from the Americans and Europeans on whom he depends for economic aid, to observe it rigorously.
Post-1979 relations between Israel and Egypt were never warm and were often downright frigid. But the Israelis accepted that since the treaty meant they could demilitarize their southern border, and focus on threats from other directions.
The Israelis want Morsi to do more to crack down on the Sinai groups but Cairo has long neglected the peninsula, which accounts to some degree for the emergence of militant forces there.
Besides, the Israelis don't want Cairo deploying large security forces in what remains a demilitarized zone.
But it seems they're not prepared -- so far, at least -- to take direct military action against the Sinai groups and worsen problems with Cairo.
Tuesday's airstrike, while aimed at militants, was directed against Gaza, not Egypt, as were the earlier strikes.
That's not likely to change any time soon but an escalation by jihadists could result in them being targeted where they live.