Israeli air strike kills two as fears grow for ceasefire

Mr Halil had escaped a previous Israeli assassination attempt. A military spokesman accused him of being "responsible for murderous terror attacks". He added that the armed forces would "continue to act with determination" to defend Israeli citizens.

This latest escalation came last night after the most violent two days since Israel completed its evacuation two weeks ago - and an hour before Ariel Sharon, the Prime Minister, was due to give a speech to the rebellious Likud central committee, fighting for his political future.

On Saturday, three air strikes killed four Hamas gunmen in retaliation for a barrage of 40 Qassam rockets launched at the Western Negev town of Sderot. The targets included an empty Hamas school, which Israel said was used for military training.

In overnight raids across the West Bank, Israeli security forces arrested 207 military and political leaders of Hamas and Islamic Jihad. The border was closed and police went on high alert in Jerusalem, Tel-Aviv and other cities to ward-off potential suicide bombers.

Mr Sharon ordered the armed forces to stop the rocket attacks by hitting the militias with all available means. "We intend to act continuously in order to strike at the terrorists," he told his cabinet."

Mahmoud Abbas, the Palestinian leader, ordered his security forces to stop Hamas and other dissidents breaking the ceasefire.

In Ramallah, Mr Abbas hinted that the summit with Mr Sharon, planned for next Sunday, might have to be postponed.