2 More Israelis Die as Violence Swells : Terrorism: Police official blames Islamic fundamentalists, sees effort to undermine Middle East peace talks.

An Israeli woman was stabbed and axed to death in the Gaza Strip on Friday, and the body of a missing soldier, three or four gunshots in his chest, was found outside Jerusalem as an upsurge in Palestinian attacks on Israelis continued in both the occupied territories and Israel itself.

Simcha Levy, 45, was murdered early Friday, according to Israeli military sources, as she drove along her daily route through the Gaza Strip, picking up Palestinians who work in Jewish settlements there and in Israel. She was the third Israeli killed in Gaza in the past 10 days and the sixth this year.

Three men, reportedly dressed as women, attacked the bus as Levy stopped for workers in Khan Yunis in southern Gaza. Breaking the bus’ windows, they stabbed her repeatedly with knives and hit her with axes, military sources said. Levy’s passengers fled, and her body was later found by residents.

“The men were waiting for her, and as soon as she stopped they broke the driver’s window and got inside,” a senior Israeli officer said, recounting the incident. “The three started knifing and axing her on the neck, the head and the chest. They just cut her to pieces.”

The body of Yehoshua Friedberg, 24, an immigrant from Montreal, was found later Friday morning less than 10 miles outside Jerusalem, along the main road to Tel Aviv. He had been shot, probably with his own M-16 assault rifle, and his body left in a forested area.

Friedberg, who was combining military service with study at a religious school in Jerusalem after immigrating from Canada two years ago, had been missing since failing to keep an appointment in Tel Aviv on Sunday. His body was found less than 20 yards off the heavily traveled highway.

Although police have not formally ruled out suicide, they noted Friedberg’s gun was missing and no cartridge shells were found. There were signs of a struggle; a kaffiyeh , a checkered Arab headdress, was on the ground near the body.

“We killed the soldier, and you will hear from us again,” a young male caller had told police Thursday, speaking Hebrew with what was described as a strong Arabic accent.

The two deaths brought to at least 12 the number of Israelis killed this year in what officials here interpret as an effort to undermine the Arab-Israeli peace talks with terrorist attacks intended to prompt an Israeli crackdown on Palestinians and thus bring a further escalation of violence.

The increase in attacks--there have been about four or five other stabbings and shootings for each one that has proved fatal--has badly frayed the nerves of the Israeli public, which last June elected Prime Minister Yitzhak Rabin on a platform of peace with security.

Yaakov Terner, the national police commander, said he believed that the Islamic Resistance Movement, known as Hamas, was responsible for the attacks in Israel as well as in the Gaza Strip and in the West Bank and was seeking to prevent resumption of the Arab-Israeli peace talks in Washington next month.

“This is Hamas,” Terner said Friday evening, “and its goal is clear--disrupting the peace process, making it impossible to continue negotiations.”

In the West Bank city of Hebron, a Hamas stronghold, Moussa Zakariya Haimuni, a 17-year-old Palestinian, was shot and fatally wounded by soldiers after he stoned their car and refused to obey calls to halt, according to a military spokesman. Three other youths were wounded in the incident.

In the Gaza town of Beit Hanoun, Nidal Hussein Nasser, 24, was killed when a bomb he was making exploded, Arab journalists said; the army said it was checking the report.

Police responded to the increase in attacks by urging all Israelis licensed to carry guns to take their weapons with them at all times “to protect themselves and others.”

Terner also ordered extra security measures, including more roadblocks, random inspections of vehicles and a greater police presence in dangerous areas. He called for hiring 2,000 or 3,000 more police officers.

But the government’s efforts to cope with the upsurge in attacks and the terrorist strategy presumed to be behind it were dismissed derisively by Yigal Carmon, former Prime Minister Yitzhak Shamir’s adviser on terrorism.

So far, the government’s actions are only encouraging and rewarding terrorism, Carmon said, noting that relatively few individuals take part in terrorist acts but that they draw increasing support among Palestinians, especially in the Gaza Strip.

“With this state of terror, there is no use continuing the peace talks,” he commented on Israeli television. The deportation of 415 Palestinians as suspected supporters of Hamas, Islamic Jihad and other Islamic fundamentalist movements had only strengthened them, Carmon continued, and undercut the Palestinian moderates with whom Israel was negotiating.

Settlers in Gaza’s Gush Katif area responded to Levy’s murder by banning employment of Palestinians in the 16 small communities where hundreds of Gazans work at agricultural jobs. The settlers said they would seek government subsidies to allow them to hire new Israeli immigrants or students instead.