Lebanese security officials said the Israeli soldier - the sixth to die in southern Lebanon in the past fortnight - was killed on Tuesday when guerrillas fired rockets at the Israeli military outpost at Dabshe.

Tens of thousands of Israelis had been preparing for retaliatory strikes by Hezbollah following Israeli bombing raids on power stations in Lebanon on Monday night.

At least 17 people were wounded in the Israeli attacks, which were the heaviest for seven months.

BBC Jerusalem correspondent Hilary Andersson says the fighting may spell the end of the peace process between Israel and Syria, a major power broker in Lebanon.

"Our operation yesterday intended to signal to the Lebanese Government and Hezbollah and even the Syrians that Israel is not willing to accept unilateral violations and we will do whatever it takes to defend our citizens," Mr Barak said, as he visited an underground bomb shelter near the Lebanese border.

Syrian Foreign Minister Farouk al-Sharaa said Israel had "shaken the foundations of the peace process" and official radio accused Mr Barak of pushing the region towards an atmosphere of violence.

The Israeli cabinet minister, Haim Ramon, said his country would no longer abide by a 1996 truce calling for protection of civilians in the event of Hezbollah retaliation.

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Many Israelis living along the border with Lebanon spent the night in air raid shelters.

Others fled south in their cars just before Israeli military planes went into action in Lebanon.

One resident in the border town of Kiryat Shmona said: "Many, many residents have left. We've been living this nightmare for 33 years."

Hezbollah warned

Israel's chief of military operations, Major-General Giora Eiland, said the raids on power stations at Jamhour near Beirut, Baalbek in the east, and at Tripoli in northern Lebanon, had been aimed at the Hezbollah guerrilla group.

"Our aim was to restrain Hezbollah," he said. "Clearly if Katyushas (rockets) are fired, it cannot go unanswered.

"An international terrorist attack on civilians in northern Israel will oblige us to take additional action which will be more severe than what we did during the night."

Hezbollah's response

But within hours of the overnight raid, Hezbollah made it clear it would not be intimidated.

"We reserve the right to retaliate at the appropriate time, which could be very soon," the group said.

Hezbollah said in a statement: "The night-time attack cannot protect the Israeli army in the occupied zone from strikes by the resistance and (Israeli) soldiers will remain targets for Mujahedeen bombs, rockets and ambushes."

The escalation of military tension between Israel and Lebanon comes at a critical time in Israel's land-for-peace talks with Syria, accused by Israel of supporting Hezbollah.

Prime Minister Barak has pledged to withdraw Israeli troops from southern Lebanon by July. That promise was reinforced on Tuesday by foreign minister David Levy.

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