Guerrillas Kill 3 Israelis in Lebanon : Mideast: Attack raises possibility that Hezbollah is escalating drive to disrupt peace talks.

JERUSALEM — Guerrillas in southern Lebanon ambushed an Israeli army patrol Sunday, killing three soldiers in the bloodiest attack against Israeli occupation forces this year. The attack suggested a stepped-up campaign by the pro-Iranian Hezbollah group to thwart the Middle East peace process.

Responding to the attack, Israeli Foreign Minister Shimon Peres said the fate of peace talks “shouldn’t be left in Hezbollah’s hands,” and he urged Syria to do more to stop terrorism if it hopes for a formal peace accord with Israel.

The latest incident followed Hezbollah rocket attacks on the western Galilee on Thursday, which prompted Israel to launch retaliatory strikes on areas north of its self-proclaimed “security zone” between the two countries.

On Sunday, Israeli forces retaliated again, this time by shelling the Shiite Muslim town of Kfar Tibnit, 16 miles southeast of Sidon, for more than an hour. Israel said two guerrillas were killed, but reports from Lebanon indicated that a civilian also died.

The tit-for-tat fighting raised anew the potential for a sharp escalation in the fighting between Israel and Hezbollah, both of whom had agreed in a U.S.-brokered cease-fire in 1993 to limit the scope of their hostilities. Israeli officials have complained of “gross violations” of that accord by Hezbollah and contend that Syria is a conduit for guerrilla weapons.

Meanwhile, Palestinian prisoners held by Israel launched a hunger strike Sunday to demand their freedom, and Palestine Liberation Organization Chairman Yasser Arafat called on his people to stage a one-day fast Wednesday to show solidarity with them.

At a news conference in the Gaza Strip, Arafat made a phased release of Palestinian prisoners a precondition for agreement with Israel on the second phase of their 1993 interim peace accord. Nearly 5,500 Palestinians are held by Israel, although the PLO says that only about 1,700 of them qualify for release under agreements with Israel.

“My special appeal and demand to the Israeli government is to start immediate, gradual release of Palestinian prisoners, as had been agreed in Oslo, Washington and Cairo, before July,” Arafat told a news conference in the Gaza self-rule area.

PLO and Israeli negotiators are trying to meet a July 1 target date for reaching agreement on the second phase of their accord, which would extend self-rule throughout the West Bank and set the stage for Palestinian elections.

Israel’s Prison Authority said that, of the 3,450 prisoners in its custody, only several hundred prisoners in the occupied West Bank town of Nablus have so far refused food, taking only salt and water. The Israeli army, which holds 1,870 more Palestinians, said it is checking the number who had joined the strike.

Under an accord that set up Palestinian self-rule in most of the Gaza Strip and the West Bank town of Jericho, Israel agreed to free 5,000 of 10,000 prisoners it then held. Israeli officials contend that they have abided by the agreement, arguing that the remaining Palestinian prisoners fall outside the scope of the agreement and pose a security risk if released. But some analysts say Israel might respond favorably if Arafat agreed to hand over Palestinians suspected of involvement in the murder of Israelis.

The prisoner issue notwithstanding, the Israeli-PLO peace talks are continuing. A PLO official in Cairo said Sunday that Israeli and PLO negotiators would meet for three days there, beginning today, to discuss the transfer of administrative powers to the Palestinians.

The two sides held negotiations near Jerusalem last week on transferring responsibility for fuel, postal services, insurance, labor, trade and industry, and statistical data. And they agreed earlier this month that the transfer of administrative responsibility in 35 key areas would be completed by July 1.

But Israeli Prime Minister Yitzhak Rabin told his Cabinet on Sunday that gaps remained between the two sides, and he suggested that the parties might not reach agreement by then.