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Sephardic Jews are from Spain and Portugal. And in addition, there are Jews in Israel from a number of countries in the Middle East and in North Africa.
There's a huge overlap between those two groups.
Among the many places the Jews have been expelled from over the centuries was Spain. In 1492, the Catholic monarchs of Spain expelled all the Jews - both from Spain and all of their possessions. Some 200,000 Jews ended up being driven out, and many of them ended up living along the Mediterranean basin in North Africa and the Middle East, mostly in the Levant area. About 100K of the Jews who emigrated to Israel between 1948-1953 were from northern Africa, and they were the descendants of the Spanish diaspora.
The other major source of Middle Eastern Jews in Israel was the huge population in the area now known as Iraq. They weren't from Spain, but instead dated back to the Babylonian/Assyrian exiles. They had lived in that area for many centuries, and prospered under the Ottoman Empire from the 1500's. Even into the early years of the newly-formed country of Iraq, the Jewish population was tolerated, until things started really deteriorating in the WWII years and the Farhud pogrom. They were finally driven out in the violence surrounding the formation of Israel, and about 120K-150K Jews moved from Iraq to Israel in the five years between 1948-1953. In fact, Iraq was the single largest country-of-origin for Israeli emigres during that time - more than any Eastern European nation.
In the first few years of Israel's existence, maybe about 20-25% of the Jewish population (250-280K or so) were Jews that had been driven out of Muslim countries in response to the UN's 1947 Partition Plan.
