Hezbollah snipers killed two Israeli soldiers at a remote outpost along the Lebanese border Tuesday, setting off a brief but intense artillery duel that reportedly killed a Hezbollah fighter, the Israeli military said.
Hours later, Israeli warplanes overflew the Lebanese capital, Beirut, setting off a series of deafening sonic booms in the city center and drawing volleys of antiaircraft fire.
The confrontations came a day after Hezbollah, the Lebanese-based Shiite Muslim militant group, accused Israel of assassinating one of its senior leaders in a car bombing. The Israeli military denied any involvement, but Israel in recent months has accused Hezbollah of providing logistical assistance to Palestinian militants and has explicitly threatened to move against the group's leaders.
While the Israeli army remained on high alert along the Lebanese border, a political deadlock in the Palestinian leadership dragged into a fourth day.
Palestinian Authority Prime Minister Ahmed Korei, who submitted his resignation to Yasser Arafat on Saturday, informed Arafat at a stormy Cabinet session Tuesday that he still wanted to quit.
However, ministers present said that Arafat once again refused to accept the resignation and that Korei agreed to stay on for the time being, though only in a caretaker capacity.
"President Arafat insisted on rejecting the resignation, and Abu Ala insisted on resigning," said Cabinet minister Saeb Erekat, referring to the prime minister by the name he is popularly given. "So the crisis goes on."
Korei's move to step aside was precipitated by an outbreak of unrest last week in the Gaza Strip, where Arafat loyalists are engaged in a power struggle with other Palestinian factions.
The Palestinian Authority prime minister has been trying, without success, to get the veteran leader to agree to sweeping reform of security forces, most of which Arafat controls.
Arafat has shuffled some security posts in the last two days, but political opponents denounced the changes as mere sleight of hand.
After two days of street violence, Gaza was relatively calm Tuesday. However, the U.N. said it was withdrawing 20 foreign staffers from the territory out of concern for their safety.
In announcing the pullout, the U.N. Relief and Works Agency took note of the recent Palestinian infighting but also complained that the Israeli military presence in the northern Gaza Strip had created a focal point for confrontation.
As for the conflict on the Jewish state's northern border, Israel said the flare-up there began midmorning, when two Israeli soldiers who had climbed to the roof of their outpost to repair an antenna were fired on from the Lebanese side.
"We are talking about a sniper attack -- very accurate shots to the head and chest," said Israeli army spokesman Capt. Jacob Dallal.
Israel fired tank shells toward the source of the sniper fire and called in helicopter gunships, and the guerrillas responded with rounds of antiaircraft fire, he said.
It was the sharpest exchange on the border in months, and the first this year involving the death of more than one Israeli soldier. Tuesday's deaths brought to 13 the number of Israeli troops killed along the frontier since Israel withdrew from southern Lebanon in May 2000.
Israeli officials had already expressed concern before Tuesday's fighting that Hezbollah would use Monday's death of Hezbollah chieftain Ghaleb Awali as a pretext to attack.
Awali was killed in a fiery car-bomb blast in southern Beirut, a Hezbollah stronghold.
At Awali's funeral the same day, Hezbollah leader Sheik Hassan Nasrallah threatened to cut off the hands of those responsible.
Even while denying participation in Awali's killing, Israeli military officials accused him of having been involved in attacks by Palestinian militants inside Israel, including bankrolling a double suicide bombing in March at the Israeli harbor of Ashdod that killed 10 port workers.
"Hezbollah believes Israel assassinated its chief of operations," reserve Col. Rafi Harnoi told Israel Radio. "It was easy to see in Nasrallah's appearance yesterday that he is truly concerned about this, because it is getting very close to his own person -- he can already see the missile that could hit his car."
A Sunni Muslim extremist group claimed responsibility for Awali's killing, but Hezbollah appeared to give that assertion little credence.
Special correspondent Azadeh Moaveni in Beirut contributed to this report.