Two Palestinians and an Israeli soldier are dead after Israeli troops launched a raid on the West Bank city of Nablus. Israeli forces thrust deep into Nablus, storming the hideout of a group of Palestinian militants suspected of planning a suicide bombing in Israel.
A Palestinian policeman, a member of the militant group Hamas and an Israeli army officer were killed during the raid.
The Israeli army says soldiers found and destroyed two bomb-making laboratories and a car full of explosives. The military operation lasted about five hours before troops withdrew from the city.
In Bethlehem, talks to end the siege at the Church of the Nativity have failed to produce an agreement.
Four Palestinian policemen, described as weak and sick from a lack of food, emerged from the church. Up to 200 people, including Palestinian gunmen, Christian clerics and civilians, have been in the shrine for more than a month.
Israel is insisting the armed men be put on trial in the Jewish state or be forced into exile. The Palestinians have proposed sending them to the Gaza Strip.
Israeli troops are surrounding the church, which is built over the grotto where tradition says Jesus was born.
Meanwhile, both Israel and the Palestinians are cautiously welcoming a U.S. proposal for a peace conference in the coming months to discuss the Middle East.
Palestinian leader Yasser Arafat says he welcomes the idea, but wants to consult with Arab leaders before agreeing to it.
Palestinian negotiator Saeb Erekat says a time line needs to be agreed to in order for both sides to have a political horizon that ends the conflict.
"What will work is a definitive time line that will tell the Palestinians and Israelis that no later than this specific date this occupation will be over, a Palestinian state will be established next to the state of Israel, and that is the only way out," he said.
A spokesman for Israeli Prime Minister Ariel Sharon says the idea of an international conference will be discussed when Mr. Sharon meets President Bush next week at the White House.
The Israeli leader has proposed a regional conference to discuss the conflict with the Palestinians that could include Arab countries like Egypt and Jordan, which have signed peace treaties with the Jewish state.