Israel and the pro-Iranian guerrillas of Hizbullah are both threatening an escalation of cross-border violence. The threat comes after the deaths of a Lebanese mother and her six children in a misdirected Israeli air raid on Tuesday were followed yesterday by a rain of Katyusha rockets on northern Israel.
Israel sent frantic messages of apology and regret after an air attack directed at a Hizbullah radio transmitter ended with the killing of Mrs Nadwa Othman (40) and six of her children, aged two to 13.
The family were in their farmhouse in Tufeil, a village about 50 miles north of the Israeli-Lebanon border, when it took a direct hit from an Israeli rocket. Only Mr Mohammad Othman, who was badly injured, and his 11-year-old son, survived.
Only too aware of the likely Hizbullah response, the Israeli authorities ordered residents in northern and western Galilee to take refuge in their bomb shelters. And, as anticipated, early yesterday morning, three salvoes of Katyusha rockets were fired from Hizbullah strongholds into northern Israel.
The town of Kiryat Shmonah was worst hit, reporting about a dozen people injured, none seriously. At least one block of flats took a direct hit, but all residents were in underground shelters.
After the rocket fire came the recriminations and the threats. In Beirut, the Iranian-funded Hizbullah vowed to carry out further strikes against Israel if the attacks on civilians continued.
At a funeral parade in Baalbek, about 30 km from Tufeil, mourners carried huge paintings of Iranian spiritual leaders and chanted "Death to America" and "Death to Israel". A Hizbullah spokesman declared Israel had struck "to complete what their [American] masters had done in Desert Fox, when they terrified our dear people of Iraq".
Israel's Prime Minister, Mr Benjamin Netanyahu, surveying the scenes of Katyusha damage, said that, by firing early in the morning, Hizbullah had been deliberately targeting school children. "We cannot let this terrorism go on," he said. "We will have to respond to it."
Israel blamed pilot error for the deaths of Mrs Othman and her family, with military officials saying the pilot had mistaken the farmhouse for his intended Hizbullah target. The civilian death toll was the worst in more than two years, since Israel killed about 100 Lebanese who had taken refuge in a UN base.
UN officials insisted at the time that Israel had fired deliberately on the base; Israel insisted it was accidental.
The new flare-up comes after months of intensifying clashes between Israeli soldiers and Hizbullah around the "security zone" - the area in southern Lebanon occupied by Israel, since the early 1980s, as a buffer between Hizbullah and the border.
Public pressure is mounting inexorably in Israel for the army to relinquish the zone and withdraw to the border, but the defence establishment fears Hizbullah will seize the vacuum and seek to target Israeli civilians.
Amid the deteriorating situation in the north, tension is also rising down south - in Israeli-Palestinian relations - as a consequence of the collapse of the Wye peace deal.
With Mr Netanyahu having demanded that Yasser Arafat publicly renounce his plans to unilaterally declare independent statehood next May, as a condition for any further Israeli withdrawal from occupied West Bank land, the Palestinians yesterday slapped Israel in the face by releasing the Hamas spiritual leader, Sheikh Ahmad Yassin, from more than two months under house arrest in Gaza City.
The sheikh was placed under house arrest shortly after the Wye deal was signed, when a Hamas suicide bomber blew himself up in a failed attack on a bus carrying Israeli children in Gaza.
At the time, the arrest of Sheikh Yassin, who has repeatedly endorsed the suicide attacks, was seen as proof of Palestinian good intentions in working with Israel to counter Islamic extremist violence.
By the same token, yesterday's move underlines Mr Arafat's anger at Israel's suspension of West Bank land hand-overs, the most recent of which was supposed to have been carried out last Friday.
Sheikh Yassin celebrated his new freedom by meeting supporters outside his home, and declaring his release was proof of the failure of the Wye deal. He added that Hamas's "pact with God" would continue.
The sheikh and his supporters are adamantly opposed to Mr Arafat's peace dealings with Israel, instead advocating holy war to liberate Palestine.
An Israeli government spokesman condemned the release of the sheikh, and urged the Palestinians to meet their "commitments to fight terror".
For Mr Netanyahu, the tension with Lebanon and with the Palestinians comes amid a slew of domestic political problems. Having been forced on Monday, because of the collapse of his coalition, to bring general elections forward from late in the year 2000 to sometime next spring, Mr Netanyahu now faces open revolt in his own Likud party.
Apart from the various opposition challengers for the prime ministership, and Tuesday's defection of one ex-Likud minister, Dan Meridor, to fight him for the top job, it seems possible that another senior Likud leader, Jerusalem's Mayor Ehud Olmert, is preparing to oust him from the Likud.
Mr Olmert held talks yesterday with other top Likud figures, but was saying little publicly. He has, however, condemned Mr Netanyahu over his handling of the coalition crisis.