The US last night urged Israel to withdraw from the West Bank town of Beit Jala, part of which was "reoccupied" by Israeli soldiers after running battles with Palestinian gunmen before dawn yesterday.
But in the early hours of this morning two Israeli tanks entered a Palestinian-ruled area of the Gaza Strip. Palestinian security officials said tanks entered Deir al-Balah, not far from the Jewish settlement of Kfar Darom.
The army's incursion - on the day that tens of thousands of Palestinians attended the West Bank funeral of a radical leader assassinated by Israel on Monday - has raised tensions here to unprecedented levels, and relatively moderate Palestinian groups appear to be aligning themselves ever more closely with extremist factions in their support for an intensification of the Intifada confrontation.
The soldiers were dispatched to Beit Jala by Prime Minister Ariel Sharon with the aim of putting a halt to months of shooting by Palestinian gunmen on Jewish homes in Gilo - a neighbourhood across the valley which the Palestinians consider occupied West Bank territory but which Israel regards as part of Jerusalem. One Palestinian policeman was killed, and about 10 Palestinians injured in the course of the fighting.
But as night fell, it was clear that the invasion - which now sees Israeli troops encamped in half a dozen buildings and controlling about 10 per cent of Beit Jala - was failing to achieve the desired effect: Palestinian gunfire on Gilo resumed, and Israeli military analysts said the gunners were now using heavier weapons with a range in excess of 1,000 metres - far deeper inside Palestinian territory than the Israeli troops have penetrated.
Israel's open-ended re-entry into Beit Jala constitutes the most dramatic reversal yet of the Oslo peace accords - under which this Christian town, along with other major Palestinian population centres in the West Bank, were transferred by Israel to the control of Mr Yasser Arafat's Palestinian Authority in 1995.
Mr Ehud Olmert, the mayor of Jerusalem, insisted that Israel had "no quarrel" with the residents of the town - most of whom have now abandoned their homes - and said Israel knew that it was Mr Arafat's "murderous" forces, rather than the locals, who were doing the shooting. The soldiers would be ordered leave, he said, as soon as they could be sure that the shooting would stop.
Palestinian officials said they believed the Israelis were in Beit Jala to stay, and that further such incursions into PA territory would follow. "This is the phase of reoccupation," said the Palestinian Information Minister Mr Yasser Abed Rabbo, saying Mr Sharon was paving the way for war.
In Ramallah, up to 50,000 people joined the funeral of Mr Abu Ali Mustafa, the leader of the Popular Front for the Liberation of Palestine, who was killed in an Israeli missile strike on Monday. Participants shouted calls for revenge; activists from the Marxist PFLP are threatening to strike at Israeli leaders. The threat to settlers is judged to be so acute that the army yesterday urged them to travel only in convoys and to rely on bullet-proof vehicles.
Mr Arafat did not attend the funeral, but several of his senior ministers did, along with leaders of the Hamas and Islamic Jihad. The funeral procession represented a demonstration of Palestinian unity that would have been unthinkable a year ago, when Mr Arafat was in open rivalry with Islamists and "rejectionists" such as Mr Mustafa, who opposed his negotiations with Israel.