"We have seen Palestinian attempts to step up terrorism over the past two weeks, on the assumption Israel will not respond for fear of upsetting the United States agenda," a source in the Israeli Prime Minister's office said.

"This was why we ordered new military operations in the territories, especially at the Muqata," the source said, referring to Arafat's presidential compound in the West Bank city of Ramallah.

The United States has called the siege "unhelpful" to efforts to persuade Arafat, the Palestinian president, to carry out security and anti-corruption reforms crucial to defusing the Palestinian-Israeli conflict and resuming peace talks.

The rare U.S. criticism of its close ally Israel also stems from White House concern that the siege could stoke Middle East tensions and harm Washington's bid to win Arab acquiescence in military action against Iraq.

Israeli tanks encircled the Muqata last Thursday after suicide bombings killed seven Israelis within 24 hours. They then reduced most of the surrounding buildings to rubble.

IMPASSE AT ARAFAT COMPOUND

Israel is demanding Arafat surrender 50 wanted militants it says are among some 200 Palestinians in the compound. Arafat has refused to hand anyone over or provide a list of people inside.

"We believe the Muqata standoff will bring about a weakening of Arafat. Two possible solutions would be to see the terrorists arrested or expelled," the Israeli government source said. There was no immediate Palestinian response to the Israeli escalation accusation, which came amid increasingly vocal U.S. irritation with Israel's resistance to a U.N. Security Council resolution demanding an end to the siege.

The resolution also called on the Palestinian Authority ( news - web sites) (PA) to curb militants. Israel says this must be done before it can pull out troops, although Palestinian police are in tatters from months of army raids and clampdowns on Palestinian-ruled areas.

Palestinian officials have accepted the resolution but demanded Israel scrap the siege at the same time.

Thursday saw new violence in the West Bank and Gaza Strip , where the uprising erupted in September 2000 after peace talks envisaging a Palestinian state in territories Israel occupied in the 1967 Middle East war stalled.

Israeli military sources said troops killed a Palestinian gunman who tried to penetrate a Jewish settlement in northern Gaza and were searching for accomplices.

In the West Bank city of Jenin, a 51-year-old Palestinian man died when he was shot while looking out a window of his home during a gunbattle in the vicinity between Palestinian militants and Israeli troops, Palestinian Red Crescent medics said.

The Israeli army did not immediately comment on that death, but said its forces came under fire near Jenin in a West Bank sweep for militants during which nine suspected were arrested.

Palestinian witnesses said two supporters of the Islamic militant group Hamas were seized by Israeli troops in an overnight raid on Tamoun, a village near Jenin.

There were no signs that planned talks between Israeli military representatives and Palestinian officials to break the stalemate would take place Thursday. Palestinians said they wanted international envoys to meet Arafat first.

Palestinian head negotiator Saeb Erekat said the Palestinians would not attend meetings with Israelis unless diplomats from the Middle East peace-seeking "quartet" -- the United States, U.N., European Union ( news - web sites) and Russia -- were first allowed to see Arafat, who is imprisoned in his own offices.

There was no word whether Israel, which has said it aims to isolate the Palestinian leader, would allow the foreign diplomats into the presidential compound.

At least 1,565 Palestinians and 600 Israelis have been killed since the Palestinian uprising began in September 2000.