Hello Triangle,
I think all Olympic Games stamps were issued with this error and I think no one yet reported it. I noticed it just yesterday evening while scanning the set.
I checked other stamps issued the same date and found one more stamp with "Paris" instead "Israel". It is a stamp about Zaka designed by David Ben Hador, the same designer of the Olympic stamps:

Other stamps issued the same day or several days before, designed by different designer, Ronen Goldberg, have the correct name "Israel" in Arabic:

Seems to me that Ben Hador, which probably can't read Arabic, confused between the two Arabic words "Paris" and "Israel". I sure it is not a policy of the Israeli post to write a name of European city on the stamps of Israel instead the state name or to omit the Arabic name of Israel.
I reported the error and will update here in case I get a response.