Israel killed two Palestinians in an air strike into Gaza City on Tuesday, launching what it said would be relentless military action against militants after a suicide bombing at a strategic port, witnesses and medics said.
They said 14 people, including three children, were wounded as well when three helicopter missiles ploughed into a one-storey house which an Israeli army statement said was a "structure in which Islamic Jihad terrorists involved in attacks on Israelis were present".
Palestinian security sources and medics said one of the dead was a passerby. The identity of the second was unknown. Both bodies were badly burned, witnesses at the local morgue said.
Israel launched the air raid soon after its security cabinet decided on military retaliation for a double suicide bombing that killed 10 people in Ashdod port on Sunday.
Israel and Palestinian militants have made clear their intention to bloody one another as much as possible so that each can claim victory after Prime Minister Ariel Sharon's planned evacuation of Jewish settlements in the Gaza Strip.
Sunday's double bombing at Ashdod, 25 km (16 miles) north of Gaza, shook Israel's sense of security because the attackers managed to sneak out of fenced-in Gaza for the first time in more than three years of conflict.
Just before the air strike, Israeli soldiers mounted machineguns on tanks and prepared armoured personnel carriers near an entry point to Gaza, paving the way for a possible thrust into the northern part of the territory.
Palestinian Negotiations Minister Saeb Erekat said Israel's new military strikes would only perpetuate a cycle of violence.
"At the same time that Sharon freezes negotiations, he unleashes missiles and tanks still believing that the problem can be solved through military solutions," he told Reuters.
"We call on him to return to negotiations, because only this will lead to an end to the cycle of violence."
Sharon reiterated before parliament on Monday that he saw no chance for peace talks with the Palestinians as long as militants kept up attacks. He broke off contacts to arrange a summit with his Palestinian counterpart after the Ashdod attack.