Jerusalem - Israel's prime minister threatened "harsh and disproportionate" retaliation after Gaza militants fired at least 10 rockets and mortar shells into southern Israel on Sunday, wounding three and raising the risk of fresh violence days ahead of elections.

Outside the UN headquarters in Beirut, a Palestinian boy in fatigues protests the conflict in Gaza. (Photo: AFP / Getty Images)

    Israel hit back late Sunday, bombing the Egypt-Gaza border area where Hamas smuggles in weapons through tunnels, Palestinians said. No casualties were reported.

    Since an unwritten truce ended Israel's offensive in Gaza two weeks ago, rocket and mortar fire from the Palestinian territory has increased steadily. Israeli retaliation, including brief ground incursions and bombing runs aimed at rocket launchers and smuggling tunnels, is intensifying.

    All three candidates to replace Prime Minister Ehud Olmert in the Feb. 10 vote levelled their own threats against Gaza's Hamas rulers.

    A late afternoon mortar barrage on the village of Nahal Oz, next to the Gaza border fence, wounded two soldiers and a civilian, the military and rescue services said. Earlier, a rocket landed near a kindergarten near Gaza, police spokesman Micky Rosenfeld said.

    Even before the mortars hit Nahal Oz, Mr. Olmert told his Cabinet that "if there is shooting at residents of the south, there will be an Israeli response that will be harsh and disproportionate by its nature."

    Hamas spokesman Taher Nunu said Mr. Olmert's threat was an attempt by Israel to "find false pretexts to increase its aggression against the people" of Gaza.

    Hamas has not taken responsibility for the new attacks, which have been claimed by smaller militant groups. But Israel says it holds Hamas, which has ruled Gaza since seizing power in June 2007, responsible for all attacks coming from there.

    Israeli defence officials said they had not yet formulated a response to the strikes, but said a return to the offensive - in which Israeli tanks and infantry units penetrated deep into Gaza - was unlikely. Instead, they said Israel would consider air strikes, including attempts to kill Hamas leaders. They spoke on condition of anonymity because they were discussing classified security matters.

    Late Sunday, Palestinians reported huge explosions as Israeli warplanes dropped bombs on the Egypt-Gaza border area, where Hamas operates tunnels to smuggle in weapons, food and other goods, Palestinians said. The military had no immediate comment.

    Israeli aircraft first flew over the area setting off sonic booms. Residents said hundreds of people who work in the tunnels fled, then waited in the streets of the border city, Rafah, for the attacks to end so they could return.

    The three-week Israeli offensive left nearly 1,300 Palestinians dead, more than half of them civilians, according to Gaza officials. Thirteen Israelis were killed, including three civilians.

    Mr. Olmert is in the last weeks of his term. He resigned in September over a string of corruption investigations. Foreign Minister Tzipi Livni, his Kadima Party's chosen successor, failed to put together an alternative government, forcing the upcoming election.

    Two candidates for premier - Defence Minister Ehud Barak and Ms. Livni - are in the government, competing for credit for last month's bruising Gaza offensive. The third, front-runner Benjamin Netanyahu of the hawkish Likud Party, is sniping from the side.

    Ms. Livni told the Cabinet meeting that Israel hammered Gaza for three weeks to persuade Palestinian militants to stop their daily rocket barrages. "At a certain point we stopped to see if they had got the very clear message that Israel will not accept fire at its civilians," she said, according to participants who spoke on condition of anonymity because the meeting was closed.

    With the resumption of the rocket attacks, she said, "the response must be harsh and immediate."

    Mr. Barak told the Cabinet that Israel would respond, but called for an end to "running off at the mouth" about the options, "even in an election season," according to a statement from his office.

    Mr. Netanyahu told reporters on Sunday that Israel's response must be tough, and then Israel must work for "removal of the Hamas regime in Gaza, and removal of the threat of rockets (falling) on the suburbs of Tel Aviv."

    Pre-election polls show Mr. Netanyahu with a lead over Ms. Livni, and Mr. Barak trailing badly.

    Both Israel and Hamas have been talking to Egyptian mediators about a long-term truce. Israel wants an end to arms smuggling into Gaza from Egypt. Hamas wants Israel and Egypt to reopen Gaza's borders, which have been virtually sealed since Hamas seized power.

    Responding to Israel's concerns, U.S. Army engineers arrived at the Gaza-Egypt frontier on Sunday to set up ground-penetrating radar to detect smuggling tunnels, an Egyptian security official said.

    Inside the Rafah terminal - the gateway between Egypt and Gaza - four army trucks loaded with wooden crates and drills could be seen accompanied by four U.S. Army engineers. The Egyptian officials spoke on condition of anonymity because of the subject's sensitivity.

    In Cairo, Palestinian President Mahmoud Abbas told reporters he will not hold reconciliation talks with Hamas unless it accepts his authority. The two sides have been divided ever since Hamas seized Gaza. Abbas' Fatah rules the West Bank.

    The new demand could make it more difficult for Egypt to broker a deal between the two sides. Hamas officials are expected to meet with Egyptian mediators Monday, while Mr. Abbas and Saudi Foreign Minister Saud al-Faisal are scheduled to hold talks with Egyptian President Hosni Mubarak.

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