Israeli air strike kills two Hamas militants

GAZA - In response to Palestinian missile salvoes, Israel has killed two Hamas militants and wounded more than 20 civilians in its first air strikes on the Gaza Strip since pulling troops out this month.

The worst surge of violence since Israel's pullout after 38 years of occupation is a blow to hopes the withdrawal could spur peacemaking and may make it harder for Prime Minister Ariel Sharon to beat back a rightist leadership challenge.

The army said it targeted two vehicles in Gaza City carrying munitions and Hamas militants. Relatives identified the two dead as Hamas men.

Israeli ministers later held an emergency session and formally decided to resume targeted assassinations of Palestinian militants, according to a source who took part in the meeting.

Another air strike came within minutes. Two Palestinian civilians were lightly wounded after an Israeli helicopter fired three missiles into the Gaza town of Khan Younis, local witnesses and medics said.

The target of strike was a group of militants from the al-Aqsa Martyrs Brigades, part of Palestinian President Mahmoud Abbas' Fatah faction, witnesses said. None of the militants was hurt in the attack, they added.

The Israeli army confirmed it had launched the strike, saying the target had been two houses used for the manufacture of munitions.

Another air strike later rocked Gaza City near a school, wounding 22, people several of them children, medics reported.

The Israeli army also confirmed that strike and said the target had been offices of militant group Hamas in the school grounds.

The army said about 40 rockets had been fired into Israel since Friday. Gaza militants said the missile strikes were in retaliation for a blast that killed 15 people at a Hamas rally.

Israel denied responsibility for Friday's blast and the Palestinian Authority said it appeared to have been an accident caused by Hamas members carrying explosives.

The Palestinian Interior Ministry condemned "Israeli aggression", but Palestinian President Mahmoud Abbas also strongly criticised militants for keeping explosives in built-up areas, calling their actions a "massacre".

"We were all shocked and pained by what happened in Gaza, the massacre ... it has become imperative now more than ever to stop ... armed and parades and disruptions in civilian areas at the expense of serious work and of the rule of law," he said.

Earlier in the day, Israeli forces massed near the border with Gaza but the cabinet decided to hold off on launching a ground offensive. Nevertheless Defence Minister Shaul Mofaz issued a stern warning to Palestinians.

"The response will be crushing and unequivocal," he said.

The surge of bloodshed left a bitter taste for Gazans still celebrating the final Israeli troop withdrawal on Sept. 12.

"We thought there would be no more death. I guess we were too hopeful," said Khaled Hamed, 30, outside the main morgue.

Vowing vengeance, the military wing of Hamas said it was "time to strike with all our might". The group has largely followed a truce Abbas agreed with Israel in February and which helped smooth the pullout from Gaza.

The army sealed off the West Bank and Gaza on Saturday, denying entry to Palestinians allowed to work in Israel. Ministers endorsed the move during their meeting and decided to maintain the closure.

Egypt called on both parties to stop the escalation. Foreign Minister Ahmed Aboul Gheit urged Palestinian factions to keep the truce. Criticising Israel, he described the bombing of the strip as a violation of international law.

The violence could complicate matters for Sharon ahead of this week's vote by his Likud on holding party primaries early.

Rival Benjamin Netanyahu says Sharon's aim of "disengaging" from conflict with the Palestinians by pulling out of Gaza was a mistake that would reward militants and encourage attacks.

If Likud votes for early primaries, it could prompt Sharon to leave the party and form a new centrist alliance. The Likud meeting starts on Sunday and a vote is set for Monday with results expected late in the day.

(Additional reporting by Mohammed Assadi in Ramallah and Edmund Blair in Cairo)

- REUTERS