ISRAELI and Palestinian commanders shook hands yesterday, bulldozers dismantled checkpoints and Palestinian traffic flowed freely in the Gaza Strip — significant steps toward ending 33 months of bloody fighting.

Israeli forces with tanks and helicopters moved deep into Gaza City early today, killing 12 Palestinians and wounding 51 others in exchanges of fire, a large-scale assault just three days before Israel’s election.

Palestinian extremists today vowed to avenge the deaths of two leading militants in a mysterious explosion, but backed away from earlier claims they were killed by an Israeli missile.

A suicide bomber blew himself up on a crowded bus a busy Tel Aviv street at lunch-time today, killing at least five other people and wounding 49 in the second such attack in two days.

ISRAELI tanks and troops swept through the town of Rafah in the Gaza Strip early yesterday, killing a Palestinian gunman, damaging houses and blowing up suspected weapons factories.

An explosion, apparently triggered prematurely by militants making a bomb, tore through a house in Gaza today, killing three people.

Israel intends to destroy the family homes of four Palestinians suspected of terrorist attacks that killed 36 bystanders - a punitive measure the Israelis believe also acts as a deterrent.

IN a carefully planned attack, Palestinian militants dressed as Israeli soldiers ambushed a bus near a Jewish West Bank settlement, then fired on its passengers as they scrambled to escape.

Israeli tanks and troops poured into the West Bank town of Nablus today, declaring a curfew and rounding up hundreds of Palestinian men in a neighbouring refugee camp as part of a search for militants.

Israeli forces raided several villages overnight and arrested 26 Palestinians suspected of involvement in terror attacks, the Israeli military said today.

Masked militiamen shot three alleged Palestinian informers for Israel in a West Bank town square today, and a large crowd quickly gathered to watch the wounded men writhing on the ground in pain.

At least four Israelis have died in two separate attacks by Palestinian militants inside Israel this morning.

A Palestinian gunman opened fire at a Tel Aviv restaurant early today, killing three people and wounding 31, four seriously, before he was shot dead, police said, the latest in a spiral of attacks and counterattacks by Palestinians and Israeli forces.

Palestinian gunmen shot dead an Israeli soldier and wounded another in a retaliatory shooting hours after a Palestinian militia leader was killed by a bomb as he emerged from his West Bank hideout.

Palestinian leader Yasser Arafat has announced that Palestinian militants have pledged to honour the latest Middle East ceasefire in an attempt to restart peace talks with the Israelis.

A Palestinian activist was killed today when the public telephone he was using exploded in the West Bank city of Nablus. Palestinians immediately blamed Israel for the attack.