These deteriorations come after the Palmer Report concluded the naval blockade was legal, though it expressed serious concerns about Israel's land blockade. While the report accused the IDF of escalating too quickly, not broadcasting an intention to board the Mavi Marmara, and possibly roughing up detained passengers, the report is being seen in Israel as a rare victory at the UN. Given the general anti-Israel sentiments of the UN, its consideration of the naval blockade as legal is a diplomatic coup for Israel.
This perception of victory has affected greatly Israel's reaction to the Turkey situation. Since the Palmer Report was not taken as an attack on Israel's legitimacy but a strengthening of it, Israel is in a much more reconciliatory mood. The government is consistently stating that it values its relationship with Turkey and does not intend a deterioration of relations.
Turkey's government, on the other hand, has many potential reasons to continue being antagonistic. The actual calculus might be some combination of the following foreign policy considerations:
1) The Palmer report de-legitimized Turkey's position. It declared the naval blockade legal and Israel took it as a statement of support rather than isolation. Turkey may be reacting to a perceived loss by doubling down its efforts. The strong role pride plays in the Middle East may be exacerbating these efforts.
2) Turkey-Israel antagonism draws the attention of the West. The State Department's remarks today may be just what the government was looking for. Turkey seeks to be a key regional player in the Middle East. If it can make the US pay attention, it may be a reminder that Turkey matters strategically in the region.
3) Turkey strategic position has changed as a result of the Arab Spring. With the attention of the West focused largely on Egypt and Tunisia, Turkey's role as a regional player has been downgraded. After the infamous Davos Forum walkout in 2009, Prime Minister Erdogan was hailed as a leader of the Arab popular cause, even despite the fact he is Turkish. Now that the Middle East has seen popular revolutions, Erdogan is no longer in this position. By extension, Turkey's regional role has changed as well.
Regardless of reason, the poor relations are hurting both sides. Israel needs Turkey's friendship, defense cooperation, and water resources. Turkey needs Israel's defense cooperation (the sanctions probably hurt it more than Israel), its alignment with the United States, and its shared status as a non-Arab country in the Middle East. While actions in the political arena are dramatic, the long-term relationship of Turkey and Israel is likely to maintain itself. Creating this end state sooner rather than later would benefit all parties involved.