For me, "present-day" Israel sounds better. "Modern day" means Israel as it currently is (culture, politics etc.), whereas "present-day" means location (e.g. "in Bohemia, now present-day Czech Republic, there were...).
For me, modern Israel contrast with ancient Israel, the country that existed 2500 years ago. Present-day Israel, however, contrasts with some earlier Israel, but the time difference is not specified. It could be the Israel of 2017 contrasted with that of 1967 or 1948, when some things were different, or it could be contrasted with ancient Israel.