Israel officially confirmed today that a ceasefire with Hamas militants will begin this week in an effort to end a year of fighting that has killed more than 400 Palestinians and seven Israelis.

Israel's army has halted Gaza Strip air strikes and raids in response to a serious drop in rocket fire from the territory, defence chiefs said today.

The Egyptian official negotiating an Israeli-Palestinian prisoner swap plans to deliver to Israel today a Hamas demand that Israel free 1,400 detainees in exchange for a soldier held since June, Palestinian officials said.

Israel is considering barring Palestinian labourers and goods from entering Israeli territory after a Hamas-dominated parliament is sworn in this weekend, security officials said today.

Hamas would consider holding negotiations with Israel, a top leader of the Islamic militant group said in an interview broadcast today, indicating that the hardline group was moderating its tone ahead of Palestinian parliamentary elections.

Israeli Prime Minister Ariel Sharon said today he would not meet with Palestinian leader Mahmoud Abbas unless the Palestinian Authority takes steps to stop militants from attacking Israelis.

Thousands of masked Hamas gunmen marched in formation at a large victory rally in an empty Jewish settlement today, the Islamic militant group’s latest show of strength since Israel completed its withdrawal from the Gaza Strip.

A senior Israeli defence official today challenged the Palestinian Authority to close the open border between Gaza and Egypt, saying its credibility was on the line over its failure to stop the flow of gunrunners and others across the frontier.

A PLANNED Israeli army pullback from cities in the occupied West Bank stalled yesterday when talks to turn over Jericho to Palestinian control broke down in a persisting dispute over army checkpoints.

The West Bank town of Jericho and surrounding areas will be transferred to the control of Palestinians within the next few days – possibly as early as this evening – to be followed by the town of Tulkarem, a senior Israeli Defence Ministry official said today.

Palestinian and Israeli officials today expressed widely different expectations for an upcoming summit between their leaders, reflecting the sharp differences that remain as the two sides try to end four years of hostilities and resume peace talks.

Fears for Yasser Arafat’s health grew today after a hospital admitted his illness was more than just flu and Israeli officials speculated he has cancer.

A retired Israeli general claimed today that on the eve of the US-led war on Iraq a year ago, Saddam Hussein had chemical and biological weapons and was in the early stages of producing nuclear arms.

PRIME MINISTER Ariel Sharon vowed yesterday, after an Israeli-Palestinian security meeting, to continue attacks on militants suspected of planning suicide bombings, a senior Israeli political source said.

Israel and the Palestinians are resuming top-level security talks despite a bloody week of bombings and missile strikes that left 60 people dead on both sides, officials said today.