Analysis: Peace in jeopardy

Shimon Peres made the deal on Ehud Barak's behalf

The bomb attack in West Jerusalem has thrown into serious doubt an agreement reached between Palestinian leader Yasser Arafat and former Israeli Prime Minister Shimon Peres aimed at ending five weeks of violence.

The attack came just hours before the Palestinian leader and the Israeli Prime Minister Ehud Barak were scheduled to issue public appeals for an end to the bloodshed.

The Israeli army fears the violence will last for months

Earlier on Thursday, Mr Arafat's Palestinian Authority had released a statement urging Palestinians to use only peaceful means in their struggle for an independent state.

But the attack has raised fears that the atmosphere between Mr Arafat and the Mr Barak will be further poisoned, and the test will be whether they can still go ahead with a joint statement.

Walking a tightrope

The Palestinian leadership is due to convene another meeting later on Thursday to discuss the wording of the ceasefire statement.

Wednesday night's agreement had signalled a chance - albeit a slim one - that the violence would begin to subside in the next two days.

But correspondents said with passions running so high, it would be impossible to avoid further bloodshed altogether.

Suspicions over the perpetrators of the bombing are already falling on two militant Islamic groups, Hamas and Islamic Jihad.

Both groups had vowed to continue their struggle, despite the agreement reached on Wednesday night.

Mr Arafat's problem now is how to react to his fractured constituency.

He is walking a tightrope between those who actively want peace - which appeared to be on the cards - and the militants who are trying to prevent it coming about.