An Israeli soldier has been killed in a gun battle with Palestinian militants holed up in a house in the West Bank town of Jenin.
Israeli soldiers surrounded the house Thursday and threatened to demolish it if those inside refused to surrender. The Israeli army says four gave themselves up after a fierce firefight. A fifth militant was caught as he tried to escape. Reports say the gunmen included members of the Al Aqsa Martyrs' Brigades and Islamic Jihad.
In another development, the Israeli military says Palestinian gunmen shot and wounded two Israelis driving in a car Thursday in the northern West Bank, near the town of Nablus.
Israeli forces also arrested 15 wanted Palestinians in a security sweep through the West Bank overnight.
The heightened tensions come two days after Israeli soldiers raided a Palestinian jail in the West Bank town of Jericho, capturing six wanted militants in an operation that outraged Palestinians.
U.S. Secretary of State Condoleezza Rice says Washington is urging both Israelis and Palestinians to exercise restraint following the prison raid.
Speaking Thursday in Sydney, Australia, Rice said that during the past year, the United States and Britain had become increasingly concerned about the safety of their monitors at the Jericho jail.
Rice says Palestinian authorities were warned in a written message on March 8 that the monitors would leave Jericho unless security at the detention center improved. The monitors pulled out of the complex Tuesday. Israeli forces moved in minutes later.
Opinion polls published in Israel after the raid show the Kadima party of Interim Prime Minister Ehud Olmert has strengthened its lead ahead of parliamentary elections on March 28. The polls show Kadima's two main rivals, Likud and Labor, remain far behind in a battle for second place.
Separately, the World Bank warns the Palestinian economy will suffer a deep depression if Israel continues to withhold revenues and international donors cut off aid once the militant group Hamas assumes power.
A report issued by the U.N. lending agency says that under a worst case scenario, Palestinian personal incomes would drop by 30 percent, and almost three-quarters of the population would live in poverty by 2008.
Some information for this report was provided by AFP, AP .