Israel responded defiantly today to unusually sharp criticism by US President George W. Bush of a barrier it is building through Palestinian areas in the West Bank.
In Gaza, Palestinian militant leaders ended two days of Egyptian-mediated talks with a decision to hold ceasefire negotiations in Cairo at the start of December.
Meanwhile, the Israeli army said its forces killed a Palestinian gunmen trying to infiltrate into the central Gaza Strip Jewish settlement of Netzarim this evening.
Israeli Vice Premier Mr Ehud Olmert said the West Bank barrier, a measure Israel says is necessary to keep suicide bombers out of its cities and which the Palestinians call a land grab, would remain an option.
"Israel will always have the right to take unilateral steps for separation from the Palestinians through a fence or other means," Mr Olmert told Israel Radio.He was responding to a speech by Mr Bush in London yesterday in which the US president toughened his stance over the barrier, saying Israel must not prejudice final peace negotiations "with the placement of walls and fences".
A senior Israeli official said there were some issues upon which Israel and the United States "do not see eye-to-eye" and that Israel would do what it believed was best to secure its citizens and protect them from Palestinian militants.
In Washington, sources in the US congress said as much as $220 million could be cut from $9 billion in loan guarantees to Israel due to settlement activity in occupied territories and the construction of a barrier that cuts through West Bank areas.
The US has deducted the cost of settlement construction from Israeli loan guarantees in the past. But this would be the first time they would reduce the guarantees due to Israel's building of the controversial West Bank barrier.