Israel's cabinet last night authorised what it called a "severe" response after the Lebanese guerrilla group Hizbullah abducted two soldiers and killed eight others in cross-border attacks.
A statement issued by Prime Minister Ehud Olmert's cabinet said Israel holds the Lebanese government responsible for the attacks and for the safe return of the abducted soldiers.
"Israel holds the sovereign government of Lebanon as responsible for the action which emanated from its territory and for the safe return of the abducted soldiers."
"Israel must act with appropriate severity in response to this attack and it will do so. Israel will respond in a forthright and severe manner against the perpetrators responsible and will act to prevent future efforts and actions directed against Israel."
Some ministers were said to be pushing for an aerial assault which would strike targets deep inside Lebanon as well as inside Syria, which has traditionally provided backing to Hizbullah. An Israeli reserve division was mobilised in the wake of the attack.
With Israel already conducting a military incursion deep inside the Gaza Strip over the kidnapping of another soldier, the raid by Hizbullah dramatically escalated regional tensions and severely complicated matters for the new government of Israeli prime minister Ehud Olmert.
Palestinian casualties continued to mount yesterday, with 23 people - including a mother and her five children - reported killed after Israeli troops and armoured vehicles pushed deep into the coastal strip during Tuesday night.
In Gaza, an Israeli aircraft dropped a quarter-tonne bomb on a house in an attempt to kill leading Hamas militants. While the militants escaped with injuries, the blast killed seven members of a single family, including both parents - the father, Dr Nabil al-Salmiah, is a senior Hamas figure - and five of their children.
Mr Olmert meanwhile called the Hizbullah attack an "act of war" and warned of "far-reaching" consequences if the two soldiers were not returned safely. He held the Lebanese government responsible for the cross-border assault and vowed a "very, very painful" response.
The Israeli army chief, Lt-Gen Dan Halutz, called the attack a turning point in the region and threatened to "turn back the clock in Lebanon 20 years".
With Israel already having launched an operation deep inside Gaza, some military officials cautioned those ministers proposing a strike on Damascus against opening a third front. While the military was said to be advocating a ground incursion into south Lebanon, ministers were said to be opposed to such a move, preferring an aerial assault.
Israeli leaders fear getting bogged down in Lebanon, which it left in May 2000 after occupying a security zone in the south of the country for 18 years.
Hizbullah's leader, Hassan Nasrallah, speaking at a news conference in Beirut, said that the two abducted soldiers were in a "secure and remote" location and that the only way Israel would get them back was if it agreed to a prisoner exchange. "No military operation will return them," he declared. "The prisoners will not be returned except through one way: indirect negotiations and a trade."
Mr Olmert, who has steadfastly refused to negotiate for the release of Cpl Gilad Shalit (19), who is being held in Gaza, adopted a similar line. "We will not yield to extortion and we will not conduct negotiations with terror groups," he said.
Yesterday's raid began when Hizbullah militants, under cover of mortar and katyusha rocket fire, cut through the border fence and attacked two Hummer vehicles with rocket-propelled grenades.
Three Israeli soldiers were killed, while the gunmen grabbed two other soldiers who were apparently wounded before crossing back into Lebanon. As Israeli forces moved across the border, a tank hit a landmine, setting off an explosion which killed all four soldiers inside. Another soldier was killed as Israeli forces gave chase inside Lebanon. A Hizbullah fighter was also killed.