15 killed, including Hamas chief, in Israeli missile attack

At least 12 people including the leader of the military wing of Hamas, his wife and three of their children, were killed and more than 100 wounded last night in an Israeli air strike in the Gaza Strip.

Nine children were thought to have died in the attack, which the Israeli military said was targeted at the head of the military wing of the Islamist militant group, Sheikh Saleh Shehada. This morning the group confirmed he had been killed.

"Hamas mourns the hero, the leader, Salah Shehadeh," Hamas said in a statement. "Anyone who dreams of so-called peace is mistaken. There is nothing called 'peace with Israel' We will avenge the blood of the martyrs."

Kofi Annan, the UN Secretary-General, immediately condemned the attack and called on Israel to obey international law.

A statement from the Palestinian Authority denounced the Israeli strike and called for international intervention to "stop these massacres." The statement charged that the aim was to "sabotage the international efforts to pressure the Israeli government to withdraw troops ... and to get back to negotiations."

Israeli foreign ministry official Gideon Meir said the attack was a "strike against a known terrorist who is responsible for hundreds of attacks on Israeli civilians in recent years." He expressed regret for the loss of life. "To our great sorrow, in these operations, sometimes, and in military operations, civilians are also killed," he said.

There were frantic scenes in the poor neighbourhood in Gaza as locals hoisted the blood-spattered wounded over their shoulders and bundled them into waiting cars. Jamal Halaby, a local police officer, said he saw the missile cross the sky, then heard the sound of a large explosion. "I fell out of my bed and I found myself a minute later covered in dust and stones, and the sounds of my children screaming and crying," he said.

The Israeli military accused Mr Shehada of being behind hundreds of attacks on Israeli soldiers and civilians in the past two years. Hamas has been claimed responsible for suicide bombings and other attacks that claimed scores of Israeli lives.

It was not clear how many of the dead and wounded were connected to Mr Shehada or Hamas. Witnesses in Gaza City said several houses collapsed after being hit by a single missile, trapping many people under rubble.

The air strike dimmed a faint glimmer of new hope after a day of renewed optimism. It came only hours after Hamas' spiritual leader, Sheikh Ahmad Yassin, said the organisation would consider stopping attacks on Israelis if the Israeli army withdrew from West Bank towns it has reoccupied.

That was after the Israeli Foreign Minister, Shimon Peres, said the Israeli army was prepared to pull out of two of the West Bank towns it has reoccupied, Bethlehem and Hebron, if Palestinian security forces could take over there and prevent attacks against Israelis ­ remarks that were greeted with scepticism by more hardline members of the Israeli government.

Last night all talk of ending Hamas attacks was off. Ismail Haniyeh, a spokesman for Hamas, said: "Not only will Hamas take revenge for the martyrs, all the Palestinian people will unify to revenge for the blood of the martyrs." He was talking to reporters at Shifa hospital, where the wounded were being treated. The large number of casualties will cause fury among many Palestinians.

Israeli security sources, quoted by the Israeli media, said among the attacks Mr Shehada was responsible for were a militant attack on a training course at a Jewish settlement for students about to enter the army in which five people were killed, and an attack on a military outpost in which four Israeli soldiers died.

The Israeli army has not reoccupied Gaza, as it did with Palestinian towns in the West Bank, but there are frequent Israeli air strikes against targets in Gaza. In recent days, jets have struck twice at metal workshops where the Israelis said Palestinian militants were making bombs and mortars to use against them.

Earlier yesterday, two Palestinians were killed in a gun battle outside a Jewish settlement in the south of the Gaza Strip. The Israeli army said the Palestinians were planning to attack a military outpost at Tel Katifa.

In another development earlier yesterday, the Israeli government said it had released some $20m (£13m) of $600m of Palestinian tax revenues it has been withholding since the beginning of the current intifada.

The West Bank and Gaza Strip are still deep in economic crisis ­ an effect of many months of Israeli blockades and 24-hour curfews.