Israel hits Arafat's nerve centre

The missiles slammed into the heart of Gaza city

Israel has launched devastating missile strikes on the Palestinian security headquarters in Gaza city, the most serious escalation in the bloody cycle of violence in recent days.

Three missiles hit the Suraya building, the headquarters of the Palestinian police, security and intelligence in Gaza, wounding at least 13 people, three critically, according to Palestinian hospital officials.

This strategy will continue until the Palestinian violence stops

Israeli PM
Ariel Sharon

Two other missiles struck the building housing the headquarters of Yasser Arafat's Fatah movement.

Israeli military sources say the attack - the first on Mr Arafat's security HQ in seven months of fighting - was in response to a roadside bomb that killed two Romanian workers working on a border fence on Thursday morning.

The BBC's Peter Biles in Jerusalem says there is a deep sense of anger in Israel as well, after Wednesday's stoning to death of two Israeli schoolboys near Bethlehem.

This escalation will destabilise the entire region

Palestinian spokesman Nabil Abu Rdainah

Following the missile strikes, Palestinian gunmen and Israeli troops battled late into the evening near Rafah, close to the Egypt-Gaza border.

At least 12 Palestinians have been wounded there since fighting flared on Thursday morning. Exchanges of gunfire were also reported at several points in the West Bank.

Fearing fall-out from the missile attacks, Israeli police announced they would restrict access on Friday to the Jerusalem holy site Jews call the Temple Mount and Muslims call the Haram al-Sharif.

Only men over the age of 25 will be allowed to pray at the site on the Islamic holy day, Israel radio reported.

Ambulances amid smoke

Reports from the centre of Gaza city described policemen fleeing the walled security compound and ambulances rushing inside, while rockets crashed down sending smoke billowing skywards.

One officer said he had been thrown into the air by the force of the blast.

Later, hundreds of angry Palestinian demonstrators gathered outside the buildings that had been hit.

Palestinian officials condemned what they called a "war of terror" against their people.

We are not afraid of death

Palestinian protesters

Israeli Prime Minister Ariel Sharon, however, said rocket attacks would continue "until the Palestinian violence stops".

The blast near the town of Kissufim on the Israel-Gaza border which killed the two Romanian workers, and seriously injured a third, prompted the Israeli army to burn farmland and destroy a police station nearby in its fifth incursion into Palestinian-controlled territory in two days.

Tens of thousands of migrant workers from Romania and other countries work in Israel, having replaced Palestinians who have been eased out of the job market in recent years due to Israeli security fears.

The subsequent Israeli bombardment is reported also to have hit a nearby Palestinian village, wounding three security officers and one civilian.

Settlement budget slashed

In another development, planned spending for Jewish settlements in the Palestinian territories has been slashed - just days after the United States criticised it as provocative.

The family of Yaakov Mandel, 14, was from the US

The Israeli Government has also said it will hunt down the killers of Yosef Ishran and Yaakov Mandel, the two teenage boys found bludgeoned to death near their home in the West Bank on Wednesday.

Police suspect the boys were stoned to death by Palestinian militants.

Palestinian officials have also condemned the killings. Senior negotiator Saeb Erekat said children and civilians were unacceptable targets, whether they were Palestinians or Israelis.

Yosef Ishran, 14, was new to the settlement

The settlements on Arab land captured by Israel in 1967 are one of the major sticking points blocking any long-term peace deal.

Palestinians say there can be no peace with Israel while the land remains under occupation, but Mr Sharon has so far refused to consider a freeze on settlement activity while the violence continues.

More than 400 Palestinians and about 80 Israelis have been killed in more than seven months of violence between the two sides.