JERUSALEM (AP) - Squads of gunmen armed with heavy weapons and explosives crossed into southern Israel on Thursday, killing seven in an attack on buses, cars and an army patrol in one of the boldest attacks on the Jewish state in years, officials said. Israel said the Palestinian assailants came from Hamas-ruled Gaza and crossed through Egypt's Sinai Peninsula.
    
Exchanges of gunfire across the Israel-Egypt border continued late into the evening, but it was not clear whether assailants were still at large within Israeli territory, Deputy Defense Minister Matan Vilnai said. Gaza militants fired a rocket at the southern city of Ashkelon Thursday night, but Israel's new missile defense system knocked it down, said Israel's chief military spokesman, Brig. Gen. Yoav Mordechai.
    
The series of attacks were the boldest against the Jewish state in years and stoked concerns that Palestinian militants might be exploiting instability in Egypt. Within hours, Israeli aircraft bombed southern Gaza in retaliation, and Gaza medical official Adham Salmia said five militants and one child were killed in a strike on a private home.
    
Israeli Prime Minister Benjamin Netanyahu said Israel would not put up with stepped up attacks from Sinai.
    
"If the terror organizations think they can strike at our civilians without eliciting a response, then they will find that Israel will exact a price - a very heavy price," Netanyahu said in a brief broadcast statement Thursday night.
    
In Washington, U.S. Secretary of State Hillary Rodham Clinton condemned the attack. "This violence only underscores our strong concerns about the security situation in the Sinai Peninsula," she said in a statement, praising "commitments by the Egyptian government to address the security situation."
    
Egypt and Hamas denied involvement.
    
The onslaught on southern Israel began at midday. The attacks came close together in time and location and appeared coordinated. Mordechai said security forces killed five assailants in all - three on the Israeli side of the border and two others who had been shooting at Israeli forces from Egypt. Earlier military reports said seven assailants were killed.
    
The attackers were booby-trapped, Mordechai said. There was no word on whether any of the attackers were captured alive or exactly how many in all were involved.
    
Israel said the gunmen started out from Gaza and made their way through Sinai, which borders both Israel and Gaza. Eilat and Gaza are about 130 miles (200 kilometers) apart along the border.
    
"The incident underscores the weak Egyptian hold on Sinai and the broadening of the activities of terrorists," Israeli Defense Minister Ehud Barak said in a statement. "The real source of the terror is in Gaza, and we will act against them with full force and determination."
    
Mordechai said Israel coordinated its operation against the assailants with Egyptian security sources, who helped to battle gunmen operating against Israel from its side of the border.
    
It was the deadliest assault in Israel since a Palestinian gunman entered a religious seminary in Jerusalem in March 2008 and killed eight people.
    
Security in Sinai has deteriorated sharply since February, when longtime leader Hosni Mubarak was ousted in a popular uprising. Many Israelis saw Mubarak as a source of stability with shared interests in containing Iran and its radical Islamic proxies in the region, such as Hamas. Mubarak also upheld the decades-old peace treaty with Israel.
    
Last week, Egypt moved thousands of troops into the Sinai peninsula as part of an operation against al-Qaida inspired militants who have been increasingly active in Sinai since Mubarak's ouster in February. The militants have taken advantage of the security vacuum caused by the abrupt withdrawal of police forces. Authorities have blamed the militants for brazen attacks on police patrols as well as a string of bombings on a key pipeline carrying natural gas to Israel and Jordan.
    
Another concern is the potential for a sharp spike in violence as Palestinians prepare to ask the United Nations to recognize them as an independent state next month in response to stalled Mideast peace talks.
    
The West Bank-based Palestinian Authority is eager to avoid a resumption of hostilities. But Israel is on alert for a variety of scenarios, including attempted attacks from Gaza. The Islamic militant leadership of Gaza does not coordinate with the Palestinian Authority and seems ambivalent about its U.N. bid.
    
The attacks began when assailants spaced at intervals of about 200 yards targeted a packed passenger bus driving along a highway about 10 miles north of the Red Sea resort of Eilat, close to the border crossing into Sinai. Within an hour, a suicide bomber blew himself up next to another bus and gunmen opened fire on two passenger vehicles, military officials said. An army vehicle rushing to the area drove over a roadside bomb, they said.
    
In all, six civilians and one soldier were killed, said Israel's southern military commander, Maj. Gen. Tal Russo.
    
Around the same time, an undisclosed number of mortar shells were fired from the Gaza Strip at Israeli soldiers conducting routine maintenance work on the security fence along the Israel-Egypt border, the statement said. Mordechai said militants also fired an anti-tank missile at an Israeli helicopter operating in the area.
    
Israel Radio said a vehicle had followed the first bus, and two to three gunmen got out and opened fire with automatic weapons.
    
The vehicle carrying the assailants fled the scene, and Israeli security forces took off in pursuit, Israel Radio said. Channel 2 reported that two helicopters had been deployed to join the chase.
    
TV footage showed the bus pulled over by a red, rocky cliff. Windows and a door of the bus were shattered, and soldiers were patrolling the area on foot. Inside the bus, seats were stained with blood and luggage littered the aisle.
    
"We heard a shot and saw a window explode. I didn't really understand what was happening at first. After another shot there was chaos in the bus and everyone jumped on everyone else," passenger Idan Kaner told Channel 2 TV. He said the attack lasted three or four minutes until the bus was able to drive away.
    
Roadblocks were thrown up in the area and entrances and exits to Eilat were sealed. Senior Israeli security officials convened in an emergency session at the defense ministry in Tel Aviv.
    
The Israeli military identified three of the gunmen targeted in the airstrike as senior members of the Hamas-linked Popular Resistance Committees who were behind the attacks. Their primary objective was to kidnap Israeli civilians or soldiers, the military said.
    
Militants use captives as bargaining chips, and the PRC was involved in the capture of an Israeli soldier, Sgt. Gilad Schalit, who has been held captive in Gaza for more than five years.
    
The driver of the bus said he had seen Egyptian soldiers open fire, but Mordechai said he was not aware of any Egyptian military involvement.
    
In Egypt, a senior security official denied that the attackers crossed into Israel from Sinai or that the buses were fired at from inside Egyptian territory.
    
"The border is heavily guarded," said a Sinai-based official who spoke on condition of anonymity because he was not authorized to speak to the media.
    
Taher Nunu, a spokesman for the Hamas government in Gaza, denied the militants' complicity.
    
"Gaza has nothing to do with these attacks in Eilat," Nunu said.
    
In November, Israel began erecting a fence along the porous border with Egypt, in part to keep out Islamic militants operating in Sinai. The fence, which is to take up to two years to build, is expected to cover at least 87 miles (140 kilometers) of the 150-mile (250-kilometer) boundary.
    
Palestinian militants in Hamas-ruled Gaza have fired intermittent barrages of mortar shells into Israel for a decade, even after the Israeli military launched an offensive in the territory in late 2008. But in recent years Israel has not suffered the repeated deadly suicide bombings and shooting attacks of years past. The area of Thursday's attacks has been largely quiet since Israel and Egypt signed a peace deal in 1979.

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