Israeli soldiers raided Bethlehem for the first time in six months today and demolished the family home of a Palestinian who killed 10 Israelis in a suicide bombing.
Israeli Vice Premier Ehud Olmert said the attack had put another nail "in the coffin of the 'road map'".
As Israel buried those killed in yesterday's bus bombing, the rift widened over the legality of a huge Israeli barrier which snakes through the West Bank.
Israel says the barrier is a security fence against suicide bombers. Palestinians call it a land grab that prejudges borders of a future Palestinian state.
Angered the case has gone to the World Court, Israel formally challenged the court's right to rule on the barrier saying it was "political issue, which must be dealt with by direct negotiations between Israel and the Palestinians".
Both the United States and Britain, which regard the barrier as a problem, sided with Israel over the role of the court.
With its legal challenge, Israel met a deadline for all interested parties to submit arguments today.
The court begins deliberations on the project on February 23rd in response to a UN General Assembly request to rule whether Israel is legally obliged to tear down the barrier.