KEY POINTS:
GAZA - At least five Palestinians and an Israeli woman were killed overnight in fresh attacks by both sides and a senior Israeli cabinet minister said all Hamas leaders involved in cross-border rocket fire could be targeted.
The woman's death in the southern Israeli town of Sderot marked the first fatality in a Palestinian rocket attack since November and is likely to stoke further Israeli anger at what Foreign Minister Tzipi Livni called an "intolerable" situation.
Israeli-Palestinian violence has surged in recent days, while Palestinian President Mahmoud Abbas's Fatah faction and the militant Hamas group have struggled to maintain calm between their own fighters following weeks of internal fighting.
Islamic Jihad, the Popular Resistance Committees and Hamas all claimed responsibility for the rocket attack. Hamas had avoided such strikes after most militant groups declared a truce months ago but had renewed them following Israeli violence.
Abbas said Israel's attacks would have "grave consequences for the entire region" and that militants should stop their rocket fire "so as not to give the Israelis the excuse they use to justify their attacks that have killed innocent victims," said the Palestinian president's spokesman, Nabil Amr.
Israel's security cabinet decided on Sunday to escalate military action in response to some 150 rockets fired from Gaza since last week, which have put political pressure on Prime Minister Ehud Olmert.
"It is our obligation to harm the rocket launchers and our obligation is to continue to harm Hamas," Livni said during a news conference in Sderot with European Union Foreign Policy Chief Javier Solana.
Dozens of Israelis burned tyres on a street in Sderot following the deadly rocket attack. The crowd scattered when a siren wailed that signals incoming rocket attacks.
Palestinians fear Israel may soon raid Gaza should the violence continue. Several vehicles and artillery batteries have been stationed near the northern border for days.
In Gaza, Palestinian women dressed in black, donning masks with the words "al-Aqsa Brigades," which is part of Fatah, and clutching rifles told reporters they were ready to commit suicide bombings against any Israeli troops who entered Gaza.
An Israeli air strike killed at least four members of Islamic Jihad on their way to launch rockets at the Jewish state. Israeli National Infrastructure Minister Binyamin Ben-Eliezer said Israel should target all militant leaders.
"I don't distinguish between those who carry out the (rocket) attacks and those who give the orders. I say we have to put them all in the crosshairs," he told Israel Radio.
Israel's internal security minister, Avi Dichter, said Hamas's leader-in-exile Khaled Meshaal, whom Israel tried to assassinate in Jordan in 1997, and Haniyeh, who lives in Gaza, could be targeted.
Thousands of Hamas supporters had earlier taken to the streets of Gaza City and gunmen fired into the air, vowing revenge, one day after an Israeli air strike on the home of Hamas politician Khalil al-Hayya.
"We will keep to the same path until we win one of two goals: victory or martyrdom," Palestinian Prime Minister Ismail Haniyeh, a Hamas leader, said at the funeral service.
One man was killed in an earlier Israeli air strike on what the Jewish state called a rocket manufacturing facility and Palestinians described as a stonemason's shop. The air strikes also cut electricity to about 50,000 people.
Abbas will go to Gaza on Tuesday to speak to leaders about maintaining law and order, following weeks of internal fighting, and perhaps renewing a truce with Israel, Foreign Minister Ziad Abu Amr said.
- REUTERS