Israel has launched a missile strike on the Palestinian security headquarters in Gaza City, the most serious escalation in the bloody cycle of violence in recent days.

Three Israeli missiles hit the Suraya building, the headquarters of the Palestinian police, security and intelligence in Gaza, sending those in the area scrambling for cover.

Two other missiles are said to have struck the building housing the headquarters of Yasser Arafat's Fatah movement.

At least 13 people have been injured, according to Palestinian hospital officials.

Reports from the scene described policemen fleeing the walled security compound and ambulances rushing inside, while rockets crashed down sending smoke billowing skywards.

One officer said he had been thrown into the air by the force of the blast.

Later, hundreds of angry Palestinian demonstrators gathered outside the buildings that had been hit.

Israeli military sources say the attack is in response to a bomb explosion that killed two Romanians repairing an Israeli border fence near Kissufim on Thursday morning.

The BBC's Peter Biles in Jerusalem says there is also a deep sense of anger in Israel after Wednesday's stoning to death of two Israeli schoolboys near Bethlehem.

Israeli Prime Minister Ariel Sharon said rocket attacks would continue "until the Palestinian violence stops".

Palestinian officials condemned what they called a "war of terror" against their people.

Settler blow
The blast which killed the two Romanian workers, and seriously injured a third, prompted the Israeli army to burn farmland and destroy a police station nearby in its fifth incursion into Palestinian-controlled territory in two days.

Tens of thousands of migrant workers from Romania and other countries work in Israel, having replaced Palestinians who have been eased out of the job market in recent years due to Israeli security fears.

The subsequent Israeli bombardment is reported also to have hit a nearby Palestinian village, wounding three security officers and one civilian.

In another development, planned spending for Jewish settlements in the Palestinian territories has been slashed - just days after the United States criticised it as provocative.

'Unacceptable targets'
The Israeli Government has also said it will hunt down the killers of Yosef Ishran and Yaakov Mandel, the two teenage settlement-dwellers found bludgeoned to death in the West Bank on Wednesday.

Police suspect the boys were stoned to death by Palestinian militants.

Palestinian officials have also condemned the killings. Senior negotiator Saeb Erekat said children and civilians were unacceptable targets, whether they were Palestinians or Israelis.

The settlements on Arab land captured by Israel in 1967 - which are illegal under international law - are one of the major sticking points blocking any long-term peace deal.

Palestinians say there can be no peace with Israel while the land remains under occupation, but Mr Sharon has so far refused to consider a freeze on settlement activity while the violence continues.

More than 400 Palestinians and about 80 Israelis have been killed in more than seven months of violence between the two sides.
bbc.com 10th May, 17.18 GMT

Pictured below: Israeli missiles slam into the heart of Gaza.