Palestinian militants who abducted an Israeli soldier set a deadline of this morning for Israel to meet their demands for a prisoner exchange or face "future consequences." The 6 a.m. deadline passed without any immediate word on the soldier's fate.
The statement by three militant groups, including Hamas, did not specify what the consequences would be if Israel did not agree to their demands.
But the wording was interpreted as a possible threat to the safety of Cpl. Gilad Shalit, who was captured and taken to the southern Gaza Strip during an audacious cross-border raid in Israel on June 25.
Israel promptly rejected the ultimatum.
"Israel will not give in to extortion by the Palestinian Authority and the Hamas government, which are led by murderous terrorist organizations," Prime Minister Ehud Olmert said in a statement. "We will not conduct any negotiations on the release of prisoners. The Palestinian Authority bears full responsibility for the welfare of Gilad Shalit and for returning him home safe and sound to Israel."
The exchange was the latest step in an intensifying game of brinksmanship.
Amid Israeli threats of a broader offensive, troops and tanks entered the northern Gaza Strip near the village of Beit Hanoun early Monday in what the army described as a limited operation to find tunnels and land mines.
On the Palestinian side, meanwhile, lawmakers endorsed a call for Israel to release Palestinian prisoners, including 26 Hamas lawmakers and several Cabinet members rounded up last week, in return for Shalit.
The militants believed to be holding Shalit first demanded that Israel free women and minors, who account for several hundred of the 8,500 Palestinians in Israeli jails.
The groups later amended their demand, calling on Israel to release 1,000 prisoners in exchange for Shalit.
Israeli leaders have insisted that they will not negotiate Shalit's release as part of a swap for jailed Palestinians. But cracks in that position were beginning to appear. Israeli newspapers reported that army officials have indicated they are open to a swap that does not involve jailed Palestinians implicated in violence against Israel. Some army officials reportedly have concluded that talks are inevitable.
"The [army] is convinced that at a certain stage 'somebody will have to talk to somebody,' " journalist Ben Caspit wrote in the daily Maariv newspaper.
A poll last week showed most Israelis favor such negotiations to free Shalit, who is believed to have been wounded during the attack at the Israeli community of Kerem Shalom. Israel has at times gone to great lengths, including large-scale prisoner releases, to win the freedom of abducted Israelis or recover the bodies of its slain soldiers.
But Israeli officials and analysts said the military incursion, which began last week when soldiers and tanks moved into the southern Gaza Strip, could stretch on for weeks, with pressure being gradually increased. The offensive has mainly consisted of airstrikes on Palestinian installations, including bridges, roads, a power plant and the offices of Prime Minister Ismail Haniyeh, a Hamas leader.
Early today, Israeli aircraft attacked a building in Gaza City that is used for meetings at Islamic University, a facility associated with Hamas. The building, which the Israeli military said was used to plan attacks against Israel, was damaged but no injuries were reported.
Also early today, Israeli troops in the West Bank arrested three Palestinians in connection with the slaying last week of an 18-year-old Jewish settler. The man, Eliayu Asheri, was kidnapped June 25 and his body was found four days later. He had been shot in the head.
On Monday, the army moved tanks and bulldozers to the outskirts of Beit Hanoun, but military officials said the activity was of limited scope and not a full-scale offensive.
An Israeli missile strike against militants armed with an anti-tank missile killed one of the men. A second militant was killed early today in the northern Gaza Strip in an airstrike against a group the Israeli military said was planting bombs. The death brought to at least five the number of Palestinian fighters killed during the incursion.
In Beit Hanoun, an Israeli tank was barely visible from a rooftop on the edge of the village. Residents, bracing for a deeper incursion, said Israeli soldiers had taken positions in two concrete-block homes overlooking orange groves and fields from which militants frequently fire homemade rockets over the border fence into southern Israel.
"We want Olmert and Abu Mazen to sit at the table to speak on how to end this war," said resident Hamza Masri, 50, referring to Palestinian Authority President Mahmoud Abbas by his commonly used nickname. "Fifty years -- we have this war."
Bush administration officials, while expressing strong public support for Israel, have begun voicing concern that a tough reaction by Israel in its week-old confrontation with the Palestinians could backfire, weakening Olmert and moderates on both sides.
Administration officials are worried that, in cracking down on Palestinians in hope of winning Shalit's release, the Olmert government could solidify support among Palestinians for the militant Hamas leadership, a senior U.S. official said. If violence continues to escalate, it could strengthen the hand of hawks on both sides while weakening Fatah leader Abbas, he said.
"The effect of this could be very much to strengthen the more extreme elements within the Palestinian movement and hurt moderates and hurt Abbas and Olmert, quite frankly," said the official, who declined to be identified because of the sensitivity of the diplomacy involved. "If it turns into a more violent confrontation without satisfying one side or another, it would strengthen the position of those who want more violence. That would be a very bad outcome."
The soldier's captors -- Hamas' military wing, the Popular Resistance Committees and a new group called the Islamic Army -- warned that they would consider the soldier's case "closed" if Israel did not begin releasing prisoners.
"The enemy shall have to bear all future consequences," their statement said.
The statement could be read as a threat to harm Shalit. But Bassam Nasser, an analyst and democracy activist in Gaza City, said it was more likely that the militants meant they would simply go silent over Shalit's fate, perhaps spiriting him to an Arab country as a pawn for possible future talks.
"They want to show who is in control. It's a sign of self-trust. They are convinced of their cause and their power," said Nasser, program coordinator for the Palestinian Center for Democracy and Conflict Resolution.
Ghazi Hamad, spokesman for the Hamas government, said releasing Palestinian prisoners was as important as the return of Shalit.
"The whole world is calling here and asking for the soldier to be released, but no one is speaking about the thousands of Palestinian prisoners in Israel," he told Israel Radio.
Palestinian lawmakers met Monday for the first time since Israel last week detained members of parliament, some of whom also held Cabinet positions. In all, eight Hamas ministers were arrested.
The session, held simultaneously in Gaza City and the West Bank city of Ramallah and linked by video, marked a rare show of unity between Hamas and its rivals in Abbas' Fatah movement. Fatah legislators vowed not to seek to take over as a result of the arrests.
The parliament, led by Speaker Aziz Dweik, a Hamas member who was not arrested, accepted without voting a resolution demanding freedom for Palestinian prisoners in exchange for Shalit's release.
Times staff writer Paul Richter in Washington and special correspondent Maher Abukhater in Ramallah contributed to this report.