The Times reported that an Iranian diplomat even impersonated a coach to enter the players' enclosure and threaten Mollaei personally.
The president of the INOC Reza Salehi Amiri also made a video call to the wrestler, saying that security agents were visiting his parents.
"Friends said that visitors to the family residence had urged his father to get the fight halted so they would not face "problems", the Times reported.
Mollaei was quoted in an international judo release saying: "I am a fighter. I want to compete where ever I can. I live in a country whose laws do not permit me to.
"Even if the authorities of my country told me that I can go back without any problems, I am afraid…of what might happen to my family and to myself."
A distressed Mollaei lost his semifinal, with Muki winning the title.
The two countries have become bitter enemies and Iran has a strict policy of banning competition against Israel. Two years ago a teenage chess player Borna Derakhshani was thrown out of the Iran team for playing an Israeli.
Mollaei has not applied for asylum but hopes his long-term visa will allow him to stay in Germany, and compete under an Olympic flag.
The world championships are the Olympic qualifier and the IJF is hoping to find a way that Mollaei can compete in Japan next year.