Why was Israel placed where it was?

Answer 1
Your question as worded is nebulous and there are two different answers depending on what you are driving at.

1) Why was the Biblical Kingdom of Israel/Judah situated where Israel, Jordan, and Palestine are currently situated? -- This is just a historical circumstance. This question is no different than "Why did the Japanese Empire start in Japan?". The Biblical Kingdom of Israel/Judah was constituted Israelites. They happened to be the indigenous people.

2) Why did the World Zionist Conferences in the late 1890s choose the future British Mandate of Palestine as the place where the Modern Jewish State of Israel should be created? -- This was a calculated decision based on a number of factors: the land's sacredness to the Jewish people. The inability to make such a state in Europe where the neighbors were much more bellicose. The increased draw that a state in the Biblical territory would give to people desiring to populate the area. There are numerous other reasons, but those three are the most important.

Further to this, Ahad Ha'am explains that the Jewish Soul is intrinsically connected to his history and in the same way that a German-American can never be as properly German as a German in Germany, the People of Israel can never be as properly Jewish if they are not in the Land of Israel. The relics in that land speak to a Jewish sensibility and character. There are also religious reasons as expounded by Rav Avraham Kook which posit that the development of a Jewish State in Israel hastens the arrival of the Messiah. There are additional political reasons why Palestine and not Europe, primarily because the Great Powers would not have acquiesced to another European State.

Answer 2
because in the Jews bible (which is called a Torah) this is where the state of Israel is.