JERUSALEM - Israel threatened "harsh and disproportionate" retaliation after Gaza militants fired at least 10 rockets and mortar shells across the border Sunday and warplanes later bombed the area where Hamas smuggles in weapons from Egypt through tunnels.
Palestinian medical officials say two people have been wounded in the airstrike in the southern Gaza Strip.
Witnesses say the men were wounded while traveling in a car in Rafah, a town near the Egyptian border. Their conditions and identities weren't immediately known.
The flare-up raised the risk of intensifying violence in the days leading up to Israel's parliamentary elections on Feb. 10.
A late afternoon mortar barrage on the southern Israeli village of Nahal Oz, next to the Gaza border fence, wounded two soldiers and a civilian, the military and rescue services said. Earlier, a rocket landed near a kindergarten, police spokesman Micky Rosenfeld said.
Late Sunday, Palestinians reported huge explosions as Israeli warplanes dropped bombs on the Egypt-Gaza border area, where Hamas operates tunnels to smuggle in weapons, food and other goods, Palestinians said.
Israeli aircraft first flew over the area in southern Gaza setting off sonic booms. Residents said hundreds of people who work in the tunnels fled, then waited in the streets of the border city, Rafah, for the attacks to end so they could return.
The Israeli military said warplanes attacked six tunnels and also an unspecified Hamas post in northern Gaza. No casualties were reported from any of the bombings.
Since an unwritten truce ended Israel's offensive in Gaza two weeks ago, rocket and mortar fire from the Palestinian territory has increased steadily. Israeli retaliation, including brief ground incursions and bombing runs aimed at rocket launchers and smuggling tunnels, is intensifying.
Even before the mortars hit Nahal Oz, Prime Minister Ehud Olmert told his Cabinet that "if there is shooting at residents of the south, there will be an Israeli response that will be harsh and disproportionate by its nature."
All three candidates to replace Olmert in this month's election leveled their own threats against Gaza's Hamas rulers.
Israel launched its three-week offensive with the aim of ending years of Hamas rocket fire at southern Israel. It left nearly 1,300 Palestinians dead, more than half of them civilians, according to Gaza officials. Thirteen Israelis were killed, including three civilians.
Hamas spokesman Taher Nunu said Olmert's threat was an attempt by Israel to "find false pretexts to increase its aggression against the people" of Gaza.
Hamas has not taken responsibility for the new attacks, which have been claimed by smaller militant groups. But Israel says it holds Hamas, which has ruled Gaza since seizing power in June 2007, responsible for all attacks coming from there.
Israeli defense officials said they had not yet formulated a response to the strikes, but said a return to the offensive—in which Israeli tanks and infantry units penetrated deep into Gaza—was unlikely. Instead, they said Israel would consider airstrikes, including attempts to kill Hamas leaders. They spoke on condition of anonymity because they were discussing classified security matters.
Olmert is in the last weeks of his term. He resigned in September over a string of corruption investigations. Foreign Minister Tzipi Livni, his Kadima Party's chosen successor, failed to put together an alternative government, forcing the upcoming election.
Two candidates for premier—Defense Minister Ehud Barak and Livni—are in the government, competing for credit for last month's bruising Gaza offensive. The third, front-runner Benjamin Netanyahu of the hawkish Likud Party, is sniping from the side.
Livni told the Cabinet meeting that Israel hammered Gaza for three weeks to persuade Palestinian militants to stop their daily rocket barrages.
"At a certain point, we stopped to see if they had got the very clear message that Israel will not accept fire at its civilians," she said, according to participants who spoke on condition of anonymity because the meeting was closed.
With the resumption of the rocket attacks, she said, "the response must be harsh and immediate."
Barak told the Cabinet that Israel would respond, but called for an end to "running off at the mouth" about the options, "even in an election season," his office said in a statement.
Netanyahu told reporters that Israel must be tough in its response, and then work for "removal of the Hamas regime in Gaza, and removal of the threat of rockets (falling) on the suburbs of Tel Aviv."
Pre-election polls show Netanyahu with a lead over Livni, and Barak trailing far behind.
Both Israel and Hamas have been talking to Egyptian mediators about a long-term truce. Israel wants an end to arms smuggling into Gaza from Egypt. Hamas wants Israel and Egypt to reopen Gaza's borders, which have been virtually sealed since Hamas seized power.
Responding to Israel's concerns, U.S. Army engineers arrived at the Gaza-Egypt frontier on Sunday to set up ground-penetrating radar to detect smuggling tunnels, an Egyptian security official said.
Inside the Rafah terminal—the gateway between Egypt and Gaza—four army trucks loaded with wooden crates and drills could be seen accompanied by four U.S. Army engineers. The Egyptian officials spoke on condition of anonymity because of the subject's sensitivity.
In Cairo, Palestinian President Mahmoud Abbas told reporters he will not hold reconciliation talks with Hamas unless it accepts his authority. The two sides have been divided ever since Hamas seized Gaza from Abbas' Fatah forces, which now rule the West Bank.
Reconciliation between the factions could make it easier to reach a more lasting solution to the Gaza-Israel conflict.