Jewish Views on Islam
According to most Jewish thinkers, Islam is not idolatry; but authorities have disagreed as to whether it's better to convert or be martyred.
Jewish-Muslim encounters are as old as Islam itself. Soon after Muhammad, the founder of Islam, died in 632 CE, the Arab conquest of the Middle East began, and the major center of Jewish learning--present-day Iraq--came under Muslim rule. In recent decades, there has been a significant amount of Jewish-Christian dialogue, but similar Jewish-Muslim dialogue has not taken place, undoubtedly in part due to the political context of the Arab-Israeli conflict. Excerpted and reprinted with permission from Judaism (Summer 1993).
Islam presented a challenge to Judaism which it had not previously faced, for here was a religion just as monotheistic as its mother religion. Here was a concept [a non-Jewish monotheism] not recognized in the traditional talmudic texts but which needed to be seriously considered. Yet, before doing so, one had to attain a proper knowledge of Islam.
This did not always happen, and we therefore find a number of early references that characterize Islam as idolatrous, due to the widespread and mistaken perception that an idol was to be found in the Kaaba, the sacred Islamic house of worship in Mecca. There is even one medieval source that regards Mecca as the name of the Islamic idol! These mistaken notions led some scholars to rule that it was forbidden to drink or even obtain benefit from wine handled by a Muslim [because of the prohibition on drinking the wine of an idolater for fear that it was used for a libation].
According to them, there was no difference in the halakhic status of wine handled by a Muslim or an idolater.
However, as time went on, the position solidified among Jewish scholars that Islam was not idolatry, due to a greater understanding by Jews of Islam's true character. Of course, even in the early years of Islam there were many who refused to regard it as a form of idolatry.
In the ninth century, Rabbi Zemah Gaon ruled that a Jew was permitted to obtain benefit from wine with which a Muslim came into contact. As already noted, this would have been prohibited if a Muslim were to be considered an idolater. However, because the need to prevent socialization with the Gentiles--apparently even non‑idolatrous Gentiles--is given by the Talmud as a further reason to forbid consumption of their wine, Rabbi Zemah ruled that Muslim wine was still unfit to be drunk by a Jew. Similar statements were also made by the Geonim [the heads of Babylonian Jewry from the 7th to 11th century] Kohen Zedek, Sar Shalom, Nahshon, and other important authorities. However, there are even some views that such wine was permissible for drinking.