Thousands of Israeli troops were massed on the Gaza border yesterday poised for an offensive after the kidnapping of a teenage soldier, but the US appealed for restraint.
Palestinian armed groups insisted they would not release the captive unless Israel frees all Palestinian women and children from its jails -- conditions already ruled out by Israeli Prime Minister Ehud Olmert.
The 19-year-old Israeli corporal, who also holds French nationality, was snatched on Sunday in a brazen raid on an army post on the Gaza Strip border in which two other Israeli servicemen and two Palestinian fighters were killed.
US Secretary of State Condoleezza Rice urged Israel to give diplomacy a chance, saying there was a "concerted international effort" underway for the release of Gilad Shalit.
Although Israel has said it will first exhaust diplomatic efforts to free Shalit, Palestinians have abandoned border homes fearing a large-scale assault, while militants fearing assassination have gone to ground.
On day three of the crisis, Defense Minister Amir Peretz toured the massive troop build-up, at the heart of a full naval and ground blockade on Gaza amid fears that Hamas militants could try to smuggle Shalit abroad.
"The terrorists have to understand that their deeds will not go unpunished," Peretz told journalists, emphasizing however, that "Israeli anger should not dictate military decisions which should be fully thought out."
Olmert has warned that a "large-scale military operation is approaching," vowing no negotiations with the abductors.
Sunday's attack, which saw gunmen from Hamas's armed wing and other militant groups tunnel their way into Israel, was the deadliest militant assault in the area since Israel's pullout of the Gaza Strip last summer.
HAMAS-FATAH PACT
Meanwhile, Hamas and Fatah yesterday completed an agreement over a plan that implicitly recognizes Israel, ending weeks of acrimonious negotiations, a top official said.
"We have an agreement over the document," said Ibrahim Abu Naja, who coordinated the "national dialogue" over the proposal. He said negotiators would present the document to President Mahmoud Abbas, who leads Fatah, and Prime Minister Ismail Haniyeh of Hamas.
"There is no complicated issue left because everyone signed and everyone approved the document," he said.
The plan calls for a Palestinian state alongside Israel and accepts a 2002 proposal endorsed by the Arab League, which offered the possibility of full diplomatic relations with Israel.
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