Two die in attack on Israeli school bus

<preform>* Sharon cancels visit to United States and Britain<br>* Washington set to renew support for 'viable' Palestinian state</preform>

Violence flared again in the Middle East yesterday, when a Palestinian gunman opened fire on a school bus in Jerusalem, killing two people, one a 16-year-old girl.

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Leader: Eventually, Israel and the Palestinians will have to start negotiating again

Violence flared again in the Middle East yesterday, when a Palestinian gunman opened fire on a school bus in Jerusalem, killing two people, one a 16-year-old girl.

The killer was gunned down on the spot by three people – an Israeli border guard, a soldier and a civilian – who picked him out in the chaotic aftermath of the attack, which happened along the unmarked border that separates Jewish west Jerusalem from the city's occupied Arab half.

Israeli police and medical officials said at least 40 people were injured – most of them only slightly – when the gunman sprayed the bus with bullets while it was stationary at traffic lights in the French Hill area of the city, the scene of several recent guerrilla attacks.

Police said the gunman was a 34-year-old member of Palestinian Islamic Jihad, from the West Bank town Hebron, which has been under Israeli military blockade for months. However, news reports said Hamas claimed responsibility.

The Number 25 bus, belonging to the municipal Egged company, was carrying several Israeli schoolgirls. Many were injured in the attack, according to Mazal Amsalem, an Israeli witness. She was on board and saw the gunman open fire "The first thing I did was throw myself to the floor and I yelled at some girls to get their heads down and they all did and they began reciting psalms and praying," she said.

There was chilling testimony, too, from a man who identified himself only as Marcus, a Jewish settler living in the occupied territories. He said the gunman "was standing there and shooting. I got out of the car. I fired. I emptied an entire clip. He fell. Then two [Israeli] soldiers came and I showed them where he was and they shot him with their M-16s."

The shooting happened after Israeli forces fired surface-to-surface missiles early yesterday into three factories in the Gaza Strip suspected of producing mortars. It was a reminder to the US and its allies that elements on both sides in the Middle East conflict see their war as separate from the assault on Afghanistan.

Attempts by the US or Tony Blair to calm the conflict and shepherd the adversaries towards diplomatic remedieshave failed so far. Israel's Prime Minister, Ariel Sharon, has cancelled a planned meeting with the US President, George Bush, scheduled for next week.

Unconfirmed reports from America say the White House is poised to reiterate its support for the creation of a "viable" Palestinian state this week. That suggests there is concern in Washington that Arab support for its anti-terrorism campaign is flagging. Perhaps a new pledge on Palestinian statehood will discourage Arab leaders from backsliding.

But, in an interview with Newsweek, magazine, Mr Sharon fortified his critics' suspicions that he has no interest in substantive negotiations.

He described the 1993 Oslo accords – which the US, the UN and Europe still consider as the ultimate solution to the conflict – as "one of Israel's most tragic mistakes". He also said the peace plans discussed at the Camp David summit last year "will never be offered again by any prime minister, including myself".

Mr Sharon unapologetically took personal responsibility for approving "20 to 30 targeted assassinations" against Palestinians, ignoring condemnation of such tactics from much of the international community.

Only a few weeks ago, he would have relished another chance to bask in the Washington limelight by meeting President Bush but said the main reason for not travelling to America, with a stop-off in Britain, was because of Israel's "security situation".