Gunmen enter Israeli settlement

The attack in Netanya was the deadliest in months

Two gunmen have broken into a Jewish settlement near the northern West Bank city of Nablus.

The attack comes after a suicide bomber killed 20 Israelis

Three people were killed and several others wounded.

The incident at the Elon Morei settlement, which is reported to be ongoing, comes as Palestinian leader Yasser Arafat said that he favoured an immediate declaration of a ceasefire.

He also said he agreed to the implementation of the Tenet truce plan "without any conditions" and that he had informed US envoy for the Middle East, Anthony Zinni.

As Mr Arafat made his announcement, Israeli Prime Minister Ariel Sharon was holding meetings with security officials to discuss possible reprisals for a Palestinian suicide attack on Wednesday which killed 20 people.

House blockaded

In the latest incident, the gunmen had blockaded themselves in a house, Israeli sources said.

It is not known if they are holding hostages.

Making his ceasefire offer, Mr Arafat said that he feared Israel was aggressively planning a "massive military operation against our people".

Witnesses say Israeli tanks are moving towards Nablus and Ramallah.

The Palestinian Authority has ordered an evacuation of its offices in the West Bank city of Ramallah following Wednesday's suicide bombing.

It is not sufficient to simply respond - the Palestinian Authority has to be destroyed

Israeli Interior Minister Uzi Landau

Officials say they fear imminent Israeli retaliation for the Netanya attack, which also injured more than 100.

The top Palestinian official at a summit in Beirut, where Arab leaders are debating a Saudi peace initiative for the Middle East, said his leader feared an "imminent" occupation of Ramallah.

Faruq Qaddumi said Yasser Arafat had told him the town, where his headquarters are based, was "besieged by 150 Israeli tanks".

Passover feast

The Israeli Defence Minister Binyamin Ben-Eliezer met army commanders early on Thursday to weigh a possible Israeli response to the Netanya attack.

Guests at the Park Hotel in the centre of the northern town were sitting down to a festive meal to mark the Passover holiday, at sunset, when "suddenly it was hell".

A man had strode through the lobby and blown himself up, creating an explosion that left the dining room a cavern of twisted metal.

It was the deadliest attack on Israel for months.

The Israeli Government was as swift as ever to blame Yasser Arafat.

According to a statement from a Palestinian official, Mr Arafat has ordered the arrest of several key militants in response.