If not, you won't really get anywhere. Israelis are very outspoken and in-your-face compared to most native English speakers. If they yell at you, just yell back a bit louder*. It's OK to get angry or upset in the process and sometimes, if he's tough enough to handle it, it's even OK to punch the guy(!) - as long as the two of you make up afterwards, which is what will generally happen. (There's even a joke that an American friend will say something that sounds a bit like an insult and say "Just kidding" while an Israeli friend will punch you in the stomach and say "Just kidding.")
*If someone is insecure, they will feel threatened if you suddenly go from normal to full volume, so as a general rule, be careful not to instigate the yelling unless the other guy is clearly badgering you or otherwise making you feel stressed out.
I would say you might have taken this a step too far. I never punched a guy in the stomach and said "just kidding" after that. Generally, punching a guy or shouting at the wrong people in Israel may end badly, so I'd advise to think wisely who to answer to and who not to. Sometimes conflicts can be avoided just by ignoring and taking it, and not out of shyness, but out of wisdom and being the bigger person.
Anyway, there's a big difference between violence (verbal or physical) and being assertive (which you definitely do need in Israel). Violence is a problem in the Israeli society, but it's definitely not part of the things that characterize (hopefully it will stay that way).
Speaking of being assertive, I think it is a middle eastern problem too. I lived in Syria and Lebanon most of my life, and my best friend is Italian. The middle eastern people "swallow" undecisive and unsure people. If you have a point that you want to stick out, you have to assertively put your foot on the floor and let it known wide and clear. Otherwise, there is no respect to different opinions...
I would say that in general this is true, Israelis (non-anglos) are far more assertive and straight to the point than most anglos. It doesn't mean you need to be a jerk and I would not take any advise about 'shouting or punching' people you do not know, but definitely be very firm whenever dealing with anyone and never be shy.