Does there have to be?
The philosophy of "mutually assured destruction" was only ever applicable between so-called super-powers. It's not even particularly relevant in today's post-cold war world, where states have got wise to the possible threats of "terrorism", nuclear or otherwise.
I am not so sure. There tends to be peace when there is a balance of forces. Hence in the UK the population is largely unarmed and we are largely at peace with each other. In the USA the population is largely armed and likewise there is largely peace. Between the USA & USSR there was balance and MAD and there was "largely" peace.
At the moment there is no balance between Israel and Palestine, Israel has all the forces and Palestine is opressed. I doubt there will be peace in that region until Palestine has the same weapons that Israel has. And I would include nukes in that. Balance in rifles, tanks, armoured bulldozers, nukes etc. Then it would not only be Palestinians that have something to lose from continued conflict, Israel could also lose on a similar scale.
You're making a (to be blunt) very simplistic assumption about the nature of warfare, IMHO, in that you appear to be viewing it as a chess game.
The issue isn't just that one would "need" battlefield or tactical nukes, or even that one might wish to deter conventional forces from taking the field or utilise backpack nukes to take out armoured divisions, it's that given the geo-political and geo-strategic importance of Israel to "the west", it's imperative for the state of Israel to have weapons with which it can "terrorise" it's neighbouring nation-states, with which it can send the message "if you attempt to invade, if you even annoy us, we have the power to obliterate your main cities, regardless of your military forces".
Imperative? not to me, "importance to the west" not to me, in fact the importance of the region to me is that there is conflict that has gone on for generations and the adults on the scene seem completely to have failed to grasp the nettle that is needed to obtain peace.
One could be taken to believe that Israel in fact does not at all want peace, instead it wants the continuation of what it has had, the ability to take what it wants when it wants it by force.
I'm quite familiar with the fact that myself and my comrades were expected to roast on the German plain.
I think the Germans were also pretty patient given their territory was to be the likely scene of the East west showdown. still they did pretty well in compensation when our armoured vehicles wrecked their crops during exercises.
Your point being...what...that they wouldn't do so? Their main sponsor has, they've got the example of most of the wars of the 2nd half of the 20th century to show that the obliteration of cities is part and parcel of "modern" warfare.
Indeed, one of the worst examples of WW2, why would anyone want to consider a repeat of such a war crime?
Why does there have to be a point to having the weapons beyond the purely instrumental point of "having them because we can, and because they give us leverage"?
There is no point in having weapons you are not prepared to use. There is no deterrent in having weapons your enemy does not believe you would use.
Israel claims (or do they not, I wonder) that they have nuclear weapons, hence they are prepared to use them to incinerate the populations of the cities of their enemies and neighbours. What a friendly state to establish, what a peace loving thing to do. Such a move only speaks of how warlike you are, how you are determined only to have your way at the expense of others.
Sweden and Denmark do not each have nuclear weapons, why is that I wonder? perhaps because they have made investments not in ways to attack each other but in ways to cooperate peacefully.
Israel does not want peace, - to obtain peace you must talk to your enemies, not just your friends - (source Desmond Tutu)