Israel said today it would review its "policy of restraint" towardsPalestinians following another day of violence since a US-brokered ceasefire came into effect last week.
Israeli Foreign Minister Mr Shimon Peres said the fragile truce was in danger of collapse if the Palestinians failed to halt attacks while Palestinian leader Mr Yasser Arafat vowed he would do all he could to restore calm after almost nine months of renewed bloodshed.
Prime Minister Mr Ariel Sharon held security talks with top ministers and security chiefs facing mounting calls from angry Israeli right-wingers to strike back after two Jewish settlers were shot dead yesterday.
He warned after meeting US Jewish leaders the bloodshed was creating an "unacceptable situation" and he would not hold back indefinitely from launching attacks in retaliation.
The Israeli security cabinet is due to meet tomorrow to consider its commitment to the ceasefire that came into effect a week earlier after mediation by CIA chief Mr George Tenet.
"I hope the cabinet will take a decision to change its policy to allow the army to act with all the necessary force to put an end to attacks," Interior Minister Mr Eli Yishai said during a visit to Jewish settlements in the West Bank.
Mr Peres told a meeting with European ambassadors to Israel the truce was at risk of collapse, with more than 50 Palestinian violations since Wednesday, Israeli army radio reported.
But public radio suggested Mr Sharon was likely to refrain from retaliatory action at least until he goes to Washington next week to meet President Bush for the second time since taking office in March.
In Madrid Mr Arafat insisted the Palestinians would act to restore calm but reiterated calls for international observers to be sent to the region as soon as possible.
AFP