As far as I'm aware, the region of modern Israel was divided into two countries, Judea and Israel, before it was conquered by the Persians. Since Judea was the kingdom containing Jerusalem and also the one ruled by King David, I would think that it would have higher significance to the Hebrews, so why did they decide to name their new country Israel?
Some addenda and expansions to my comment above:
Consequently, from the Greco-centric and thus standard Western view, Philstinia (Palestinie) was an established ancient kingdom to the East, much more prominent than the Kingdom of Israel which, although it had a treaty with the Davidic Dynasty in Israel (10th c BCE), was more remotely connected to the Greeks. That may be, one might hypothesize, why the region is more strongly identified with the name “Palestine” than “Israel” at least in the imagination of Hellenistic and later Roman cultures.
Nonetheless, the Romans renamed Judaea “Palestine” after they crushed the Jewish rebellion in 70 CE as a deliberate humiliation and act of erasure.
They installed Herod as a king in 33 BCE and promoted Judaea to a “client” state. The native Jews fought several rebellions throughout Roman occupation of Israel/Judaea, finally provoking the Romans by waging all-out war against them, in 66 CE, which was put down harshly by Vespasian. The Romans killed and in some cases openly martyred a very large number of Jews, destroyed the Temple in Jerusalem, and enslaved or dispersed ( thus the ”Diaspora “) most of those Jews who survived.