A muddy alley in the Zeitoun neighbourhood of Gaza City became the symbol of Mr Yasser Arafat's dilemma yesterday. The followers of Sheikh Ahmed Yassin, the blind and crippled spiritual leader of the extremist movement Hamas, surrounded his house and refused to end their protective sit-in as long as Sheikh Ahmed is threatened by the Palestinian Authority.
It was here that 20-year old Mr Mohamed Salmi, a Hamas supporter, was shot dead during four hours of fighting between Mr Arafat's Military Security and the Izzedin Qassem Brigades in the early hours of the morning. Two other men were wounded and a police car destroyed.
Palestinians fought in the West Bank too, after Mr Arafat's security chief, Mr Jibril Rajoub, sent a unit to Bethlehem to arrest Mr Yahia Dahamse, whom they suspect of involvement in attacks against Israel. But in Bethlehem they were confronted by Tanzim, the armed wing of Mr Arafat's own Fatah movement. When Mr Rajoub's men refused to release Mr Dahamse, the Tanzim fighters opened fire on Gilo, in Israeli-annexed east Jerusalem. The two incidents show how close Palestinians have come to a civil war.
The Israeli Prime Minister, Mr Ariel Sharon, demands that Mr Arafat arrest Islamist "terrorists" or face more attacks like those that destroyed Palestinian installations on Monday.
Mr Arafat claims he has already arrested 180 activists. The move is extremely unpopular and he fears Mr Sharon may bomb the prisons where they are held.
Mr Sharon told Likud members of the Knesset that he will step up assassinations of Palestinian suspects. If prisoners were killed in Israeli bombings, Mr Arafat would be blamed. He is considered more than ever "an Israeli agent" - an epithet used by a 14-year-old boy outside Sheikh Ahmed Yassin's house yesterday.
The fighting in Zeitoun started around midnight on Wednesday, when Palestinian security forces approached the religious leader's house, apparently in the hope of arresting him. Sheikh Ahmed had promised to avenge the Israeli retaliatory bombardments on Monday. A sentinel shouted a warning from the loudspeaker at the Mogama Islami mosque two blocks away. At least 2,000 men rushed to the scene to protect the Hamas spiritual leader, who was imprisoned by Israel for close to a decade, until 1997.
"Both sides had guns," said Majid, a neighbour of Sheikh Ahmed who sheltered as best he could with his wife and four children. "It was very noisy, very frightening, and it went on for four or five hours." As we spoke, boys pelted the burnt-out police car a few metres away with stones. Mr Arafat's forces had retreated several blocks away, but lingered in the side streets, wearing camouflage uniforms and flak jackets. "The Military Security are the only ones who'll still do these dirty jobs," a local resident said. In the past, Mr Arafat would have sent Preventive Security, headed in Gaza by Mr Mohamed Dahlan. But Mr Dahlan is one of the "young guard" now opposed to Mr Arafat. "Al Qassem is the pioneer of resistance," says the slogan painted on the front of Sheikh Ahmed's house, next to the group's emblem. It shows crossed Kalashnikovs rising above Jerusalem's Al Aqsa mosque, encircled by the Hamas and Palestinian flags.
The Hamas flag bears the opening words of the Koran, "There is no God but Allah." Hamas appears to have more popular support than the PLO in Gaza. Ayman, a schoolboy of 14, told me he has joined the fundamentalist movement. "It fights against Israel and protects Al Aqsa and our land," he said. "I am ready to be a shaheed (martyr). "I would adore to become a shaheed." Abdul-Kader (27), an unemployed plasterer, said he switched allegiance from Mr Arafat to Hamas when the second intifada started 14 months ago.
"The peace process gave us nothing," he said. "The simplest right we ask for is freedom of movement, and the Israelis will not even let us move north and south within Gaza. The peace process set us back 20 years. The settlements are taking more and more of our land." But how could he approve of Hamas suicide attacks inside Israel, like those which killed 24 Israelis last weekend? "We don't have helicopters or missiles," Abdul-Kader replied. "All we have is our body and our spirit. This is the only way we have to fight."
The men of Zeitoun are convinced that Mr Arafat would be mad to comply with US and Israeli demands. "Whatever he does, it won't be enough; Mr Sharon always demands more," one said. Mr Arafat has predicted the Israelis will have no one left to negotiate with if they destroy him. The Foreign Minister, Mr Shimon Peres, echoed that warning, saying: "If we get rid of Arafat, that will leave only Hamas." But the extreme right of Mr Sharon's party, Likud, seem to agree with the Knesset member, Mr Silvan Shalom. Quoted in Ha'aretz, he said: "Me, I prefer Hamas."