There was a CONDITION to Israel becoming God's “treasured possession”. They had to obey Him fully and keep His covenant. Obviously, this did NOT happen. Even before Moses got off the mountain where he received the tablets upon which God wrote the ten commandments, Israel had broken them. God then told Moses to build a coffin (called the Ark of the Covenant) and put the broken tablets inside. Then he was to make a MERCY SEAT above the Ark.
Thereafter God required of Israel animal sacrifices to ATONE for their sin of breaking the commandments. This continued to be required year after year UNTIL Jesus was sacrificed on the cross, He was the FINA sacrificial Lamb of God. His blood has taken away the sins of Israel and the sins of the whole world.
“The next day John saw Jesus coming toward him and said, Look, the Lamb of God, who takes away the sin of the world!” (John 1:29)
He is the atoning sacrifice for our sins, and not only for ours but also for the sins of the whole world." (1 John 2:2)
Israel has never become His “treasured possession”. To become so required a sinless existence and is impossible in this present evil age. However, in the ages to come Israel and the rest of humanity will become perfected in the image of God when resurrected to immortality. Then. humanity will indeed be God's treasured possession. God told Israel of this time….
“This is the covenant I will establish with the people of Israel after that time, declares the Lord. I will put my laws in their minds and write them on their hearts. I will be their God, and they will be my people…" (Hebrews 8:10)
And for the rest of humanity...
"...you may proclaim the excellencies of Him who has called you out of darkness into His marvelous light; for you once were not a people, but now you are THE PEOPLE OF GOD; you had not received mercy, but now you have received MERCY.” (1 Peter 2:9-10)
“…the grace of God has appeared bringing salvation to ALL humanity, instructing us to deny ungodliness and worldly desires and to live sensibly, righteously, and godly in the present age, looking for the blessed hope and the appearing of the glory of our great God and Savior, Christ Jesus, who gave Himself for us to redeem us from every lawless deed, and to purify for Himself a people FOR HIS OWN POSSESSION, zealous for good deeds. These things speak and exhort and reprove with all authority. Let no one disregard you.” (Titus 2:11-15)
"So then, remember that at one time you were Gentiles in the flesh—called “the uncircumcised” by those called “the circumcised,” which is done in the flesh by human At that time you were without the Messiah, excluded from the citizenship of Israel, and foreigners to the covenants of the promise, without hope and without God in the world. But now in Christ Jesus, you who were far away have been brought near by the blood of the MessiahFor He is our peace, who made both groups one and tore down the dividing wall of hostility. In His fleshHe made of no effect the law consisting of commands and expressed in regulations, so that He might create in Himself one new man from the two, resulting in peace." (Ephesians 2:11-15)