Israelis shot in Gaza attack

Jewish settlements are often targets for attacks

Two Israeli soldiers have been killed and at least two others injured in a gun and grenade attack near the Jewish settlement of Dugit in the northern Gaza Strip, the Israeli army says.

A Palestinian attacker was also shot dead in the ensuing gun battle, according to military and settler sources.

In the West Bank, Israeli forces are continuing to surround the town of Jenin after staging an incursion there in the search for militants.

Israel says it is looking for suspected militants

Israeli authorities are preparing to begin work on Sunday on a controversial security fence between West Bank Palestinian towns and Israeli areas in an attempt to keep out would-be suicide bombers.

The attack at Dugit came just after nightfall, shortly after the Israeli army found a car packed with explosives near the nearby settlement of Elei Sinai.

Reports say that a group of five Palestinian militants approached the settlement and then ambushed Israeli soldiers guarding the settlement.

Four of the five Palestinians managed to escape.

The Islamic militant movement Hamas said it carried out the attack.

Militant Palestinian groups in Gaza have often targeted Jewish settlements, which are illegal under international law.

The attacks are often followed by Israeli military strikes against Palestinian security posts.

Jenin raid

In Jenin, Palestinian witnesses said tanks, armoured vehicles, and jeeps, supported by helicopter gunships had entered the town, imposing a curfew and searching for suspected militants.

The Israelis pulled back after five hours but encircled the town.

A military spokeswoman said there had been specific warnings that militants in Jenin were planning imminent attacks.

In the past 20 months, 20 suicide bombers from Jenin have launched attacks on Israeli targets.

The Israeli Government is about to start building a major barrier to try to keep West Bank Palestinians out of Israel.

Posts mark the line of Israel's proposed security fence

The first phase of the plan is reported to involve 110 kilometres of trenches and electric fencing separating the towns of Jenin, Tulkarm and Qalqilya from Israeli cities.

Palestinians oppose the plan and so do many Israelis, but for different reasons.

The Palestinians say the new fence will mean Israel effectively annexing part of the West Bank, including 11 villages.

The Palestinian minister Ghassan al-Khatib said it was also racist, because it would not stop Israeli soldiers and settlers travelling into the West Bank.

Jewish settlers are also concerned about the political message of recreating any kind of division between Israel and the territory it occupied in 1967.

Peace initiatives

Diplomatic efforts are continuing ahead of an expected speech by US President George W Bush, outlining his vision for a resolution to the region's conflict.

On Friday, Secretary of State Colin Powell held separate meetings with Israeli Chief of Staff Lieutenant General Shaul Mofaz, Saudi Foreign Minister Prince Saud al-Faisal and Palestinian negotiator Nabil Shaath.

Earlier this week, Israeli Prime Minister Ariel Sharon held talks with Mr Bush.