Palestinian fighters wounded 12 soldiers in a rocket attack on Israel today, defying calls for a ceasefire from Mr Mahmoud Abbas, the frontrunner to succeed Mr Yasser Arafat in an election on Sunday.
Israeli soldiers have killed more than 20 Palestinians in Gaza in the past week, including seven youths aged 11-17 who died yesterday from a tank shell which Israel said was aimed at militants firing rockets on Israeli targets.
The escalating violence comes despite calls by Mr Abbas for an end to rocket attacks from Gaza to allow talks on a state in Israeli-occupied lands to resume with Israel after four years of a Palestinian uprising.
Israeli Prime Minister Ariel Sharon, raising doubts over new hopes for peace following Arafat's death, said he did not think the Palestinians could achieve anything if violence continued.
The rocket crashed inside the Nahal Oz army base just beyond Gaza's border fence. Hamas militants said they were avenging the killing of the seven Palestinians in a Gaza strawberry farm.
Early today, troops shot dead two Palestinian gunmen who ambushed them at Gaza's Erez border crossing. The body of one of the gunmen was found more than 12 hours later after he fled back with injuries into a Palestinian-controlled area.
In Jerusalem, an Israeli religious party agreed to join Sharon's coalition, clearing the way for a unity government designed to overcome far-right resistance to his plan to withdraw settlers from Gaza later this year.
Palestinians welcome any Israeli pullout but Sharon vows to keep West Bank land they want for a viable state.