An Israeli-Palestinian cease-fire was in tatters on Wednesday after Palestinian gunmen killed two Israelis and wounded about 15 during a surprise raid into a Jewish settlement in the Gaza Strip. 
Israeli Prime Minister Ariel Sharon convened a meeting of his inner cabinet to urgently review the situation a week into a truce plan battered by the deaths of 20 Palestinians, two Israelis, a car bomb in Jerusalem and many shooting attacks. 
He was expected to appeal to Palestinian President Yasser Arafat to immediately arrest in militants, more than a year after the start of a Palestinian uprising against Israeli occupation. 
Israel tightened a naval blockade of Gaza. Sharon was also sure to hear calls from right-wing members of his coalition government to abandon the cease-fire and launch reprisal raids. 
The military wing of the militant Muslim group Hamas, which opposes the truce plan, claimed responsibility for the attack at the Alei Sinai settlement near Gaza's northern border with Israel in which troops shot dead three Palestinian gunmen. 
The attack was intended to show "the blood of the Palestinian people is not an open target for anybody," the Hamas raid unit said in a statement. 
Settlers hid in dark rooms and shielded children with their bodies during the attack, reaching out to check each other for blood or injuries. 
"I have no way of describing that feeling -- it was terrible...We hid in the room, me with my gun pointing at the door and hoping that God would let us get out...," settler Gabi Vinshelbaum told Israel's Army Radio. 
The Palestinian Authority condemned the raid but found itself on the defensive again, hours after celebrating comments by President Bush saying the creation of a Palestinian state was part of the U.S. vision for the Middle East. 
Bush wants the conflict to cool to make it easier for him to draw Arab and Islamic countries into a global alliance against terrorism after last month's attacks on New York and Washington. 
The army named the girl who was killed as Liron Harpaz, 18, a soldier from Alei Sinai. Israel radio said the other fatality was a 20-year old Israeli man from the Israeli city of Lod. 
Israeli cabinet minister Tzipi Livni earlier had said the dead were around 15 or 16. 
Two of the wounded were in critical condition and at least seven soldiers were among the wounded, the army said. 
Israeli Prime Minister Ariel Sharon called it "another terrible act of terror." "We are in a war here. We are facing a very heavy war and struggle. We are facing Arab and Palestinian attacks," he told a meeting of Christian Zionists in Jerusalem. 
Israeli officials said it was too early to say how Israel would respond or to predict the fate of the cease-fire plan agreed by Arafat and Israeli Foreign Minister Shimon Peres at talks on September 26. 
The Palestinian Authority said Arafat had pledged to punish those responsible for the raid on the Jewish settlement. 
Arafat is under pressure from Israel and the United States to do more to rein in militants. But Mahmoud al-Zahar, a Hamas political leader in Gaza, told Abu Dhabi Television he did not believe there would be mass arrests. 
"I don't think that the Palestinian streets will agree, and the arrest of one or two will have no effect," he said. 
The raid set back hopes that an end could be in sight to a 12-month-old conflict in which at least 607 Palestinians and 171 Israelis have been killed. 
Israel Radio said the gunmen had penetrated a section of an electronic security fence around the settlement that was not working. Other media reports said they entered through the fence but had set off an alarm before shooting broke out. 
One settler, Avi Farhan, told Army Radio the settlement was celebrating its 18th anniversary when gunfire erupted and the army quickly ordered all residents to go inside their houses, turn off their lights and lock their doors. 
Palestinian gunmen often shoot at settlers on roads in the West Bank and Gaza. Settlers, who live in fortified settlements built on land Israel occupied in the West Bank and Gaza Strip in the 1967 Middle East war, have also attacked Palestinians. 
Israel on Sunday gave Arafat 48 hours to enforce the truce he agreed with Peres. Each side has blamed the other for violating the cease-fire deal. 
