Palestinians and Israelis are locked in another cycle of deadly suicide bombings and punishing air strikes amid dimming hopes for resurrecting the peace process any time soon.
Frustrated and angry Palestinians are rallying around their leader Yasser Arafat as hopes for resuming peace talks diminish. The market in Gaza City is bustling. Palestinian families are buying ingredients for the evening meal that breaks the daily fast of Ramadan.
It's a fairly normal routine during the holy Muslim month. But shopkeeper Ibrahim Malakhi says life is anything but normal these days.
"Nowadays we open our shop in the morning. What do we do? How do we make money?" the shopkeeper asks. "We can cover the electricity and pay the rent. That's what we can only do."
The economy in Gaza is in shambles since the intifada erupted more than a year ago and Israel barred Palestinian workers from getting to their jobs inside Israel.
Ibrahim shrugs. "Life has become very hard," he says. "We're living with the sound of [Israeli] aircraft. We have our breakfast under the bombing. That's how we are living."
Israeli jets and helicopter gunships are targeting security compounds and suspected terrorists in Gaza and the West Bank, especially after suicide bombers killed more than 25 people earlier this month.
Israeli Prime Minister Ariel Sharon has intensified the military strikes in the West Bank and Gaza to pressure Palestinian leader Yasser Arafat do more to end extremist attacks against Israelis.
Standing in front of his apartment building, Mouin Abu Dagen describes how his wife and children had to run for cover last week when Israeli fighter jets hit the walled security compound across the street. The 46-year-old father of 10 says his windows were shattered and so was his usual calm composure.
The air strikes, military incursions and targeted assassinations have killed at least a dozen Palestinians in the past few days, including two Palestinian youngsters on Monday.
"If one Israeli dies, Mouin complains, the whole world stands up. But when Palestinians get killed, he says, nobody comes to see or stands up for us," he says. Mouin has been out of work for more than a year now, unable to get to his job as a TV repairman in Israel because of the Israeli closure.
Nineteen-year-old Siham Bassiouny is convinced Ariel Sharon and his policies are the obstacle to peace.
"First, they have to withdraw from the lands they have reoccupied during this intifada. That will give us a reason to believe. That will encourage us to continue negotiations and calm the situation," he says.
That may be more difficult now as attitudes harden on both sides.
Many Israelis who once pushed for peaceful coexistence talk openly about building permanent walls of separation amid fears of more suicide attacks.
Israeli Prime Minister Sharon refuses to talk peace with Yasser Arafat until he cracks down on Islamic extremists like Islamic Jihad and Hamas. Mr. Arafat says he is cracking down and points to the arrests of nearly 200 terrorist suspects by Palestinian police. Israel says it is not enough.
All that makes 45-year-old Na'ama angry. She calls the Israeli military actions terrorism too. "Arafat should not arrest Palestinians for Israel, Na'ama says. They are not terrorists. They are defending us, she says and fighting for our country," she says.
Despite simmering anger over the arrests and growing support for Islamic militants, Palestinians here now refrain from criticizing Mr. Arafat too much in public. And, Israeli criticism of Yasser Arafat seems to have strengthened him in the eyes of many Palestinians who now are rallying around their leader.
New graffiti now covers the fading tributes to fallen fighters on the walls of Gaza. Phrases written in the red, black, white and green colors of the Palestinian flag read "Long Live Arafat" and "Arafat is the symbol of our Freedom".