A senior Hamas official today tried to sneak £434,000 into the Gaza Strip, hiding 500-euro bills in a white pouch tucked under his shirt in the first major cash smuggling attempt by an increasingly desperate Hamas government choked by Western economic sanctions.

Israel will kill the founder of Hamas, Sheik Ahmed Yassin, in retaliation for a suicide attack on border guards, Israel’s deputy defence minister said in the bluntest warning yet against leaders of the Islamic militant group.