Israeli gunships kill two in Gaza

Israel has targeted Palestinian militants in gunship strikes

Israeli helicopters fired missiles into a car in the Gaza Strip town of Khan Younis, killing two people and injuring 15.

The Israeli army said it had targeted a member of the militant group Hamas, who was injured in the attack.

However the people who were killed - named by Palestinian hospital officials as Arkram Yousef Abu Farhana, 30, and a 20-year-old woman - had no links to a militant group.

The attack comes as the Palestinian Authority continues its efforts to convince militant groups to suspend their attacks on Israelis - a key step in the international peace plan for the Middle East.

One of the leaders of the hardline Islamic Jihad, Mohammed el-Hindi, has denied that any ceasefire agreement has been made, telling the BBC his group was still studying the proposals and that there would be no agreement soon.

'Handcuffed'

An Israeli army spokesman said a helicopter fired two missiles to take out a "Hamas terrorist cell on its way to firing mortar shells into Israeli communities".

Israel has recently pursued a policy of using helicopter gunships to kill Palestinian militants, saying it has the right to pursue those plotting attacks in the absence of a crackdown on them by the new Palestinian leadership.

Sources from the militant group Hamas said the target of the strike was a member of its armed wing, the Ezzedin al-Qassam Brigades.

The Ezzedin al-Qassam Brigades said in a statement that the missile attack was "clear evidence that the criminal occupier does not want to achieve the calm it claims to be seeking. We will not stand by handcuffed. On the contrary we will respond to such crimes."

Earlier on Wednesday, two members of Hamas were killed in a gun battle with Israeli soldiers.

Hamas' military wing said two of its gunmen had attacked an Israeli military outpost in the town of Beit Hanoun to avenge Israel's killing of senior Hamas member Abdullah Qawasme.

Bush 'sceptical' on truce

In Washington, US President George W Bush was sceptical about reports a ceasefire was near.

"I'll believe it when I see it, knowing the history of terrorists in the Middle East," he said.

"It's one thing to make a verbal agreement, but in order for there to be peace...we must see organisations such as Hamas dismantled," the president told a news conference.