ISRAEL killed four Palestinians in two missile strikes into a Gaza refugee camp on Wednesday, pursuing what it called a relentless offensive against militants after two suicide bombers struck a strategic Israeli port.

Israeli military action against militants and their leaders unfolded late on Tuesday when three helicopter missiles crashed into the house of an Islamic Jihad commander in Gaza City, killing two Palestinians. The commander escaped with minor injuries.

Fighting flared in the Rafah refugee camp as Israeli troops backed by tanks moved in and demolished several Palestinian houses, coming under rifle fire from bands of militants, witnesses said.

Schools in the densely-populated Rafah refugee district sent children home for fear of more air raids. Israeli helicopter gunships were seen in the skies all over the Gaza Strip.

Israel?s cabinet on Tuesday decided on sustained military action against Gaza militants, keen to prevent them claiming victory if Prime Minister Ariel Sharon goes ahead with a planned evacuation of Jewish settlements from the seaside territory.

Sunday?s suicide attack that killed 10 Israelis in the port of Ashdod unnerved Israeli security chiefs because the bombers managed to slip out of fenced-in Gaza territory for the first time in almost three and a half years of conflict.

Palestinian gunmen lay in wait throughout Gaza for what they expected to be widescale Israeli incursions into the strip where 7,500 Jewish settlers live amidst 1.3 million Palestinians. ?We prepared ourselves and said farewell to our families. If they come in it will be a battle to the death,? one gunman said.

In Rafah, on Gaza?s border with Egypt, an Israeli helicopter fired two missiles overnight into a group of Palestinians, killing a gunman and a 45-year-old bystander, witnesses said.

Military sources said troops fired two missiles at two armed Palestinian groups laying explosive charges intended to counter Israeli forces who often raid the camp, a bastion of militants.

Another Israeli missile launched into Rafah around 0800 GMT killed a 17-year-old youth and critically wounded a boy of 15 who died later, medics said. Israeli military sources said the missile targeted a group of gunmen digging in.

Islamic Jihad identified one of the dead in the Gaza City missile attack as a member and the other as a passerby. Fourteen people, including three children, were hurt.

Fighting between Palestinians also erupted in Gaza City on Wednesday when local security forces halted a car filled with Hamas militants. One civilian was killed and 17 people were wounded during the gunbattle, witnesses and medics said.

Evacuation plan

Palestinian security forces have stepped up patrols in Gaza to combat a breakdown in law and order.

Deputy Defence Minister Zeev Boim linked the offensive to the settler evacuation plan, part of unilateral moves prompted by an impasse in peacemaking that would also deprive Palestinians of West Bank land they want for a state.

?The decision to escalate ongoing operations is intended to prevent Palestinians from turning the disengagement plan, if it is carried out, into some kind of heroic victory over Israel pulling out under fire,? Boim said on Israel army radio.

A US-backed peace plan envisaging Palestinian statehood in the West Bank and Gaza, territories Israel occupied in the 1967 Middle East war, has been sidelined by persistent violence.

Palestinian Negotiations Minister Saeb Erekat said: ?We call on (Sharon) to return to negotiations, because only this will lead to an end to the cycle of violence.?

Nidal al-Mughrabi