The Israeli army stepped up its response to rocket strikes from the Gaza Strip with a series of attacks against Islamic militants on Sunday.

As Prime Minister Ariel Sharon promised to use "all means" against the militants, Islamic Jihad commander Mohammed Khalil was killed in an airstrike in the Gaza Strip.

Israeli air strikes struck targets throughout Gaza on Sunday, including weapons-storage facilities and a school the military believes Hamas used to raise funds for attacks. Nineteen people were injured in the attacks.

The strikes are part of a campaign to stop a hail of rockets fired at border towns.

Just two weeks ago, Israel finished its pullout from Gaza after a 38-year occupation. Militants savoured it as a victory

"There shall be no restrictions on the use of all means to hit the terrorists and the terror organizations, their equipment and their hideouts," Sharon told his Cabinet Sunday.

Israel says Palestinian president Mahmoud Abbas must do more to crack down and disarm militants -- essentially forcing Abbas into a showdown he has tried to avoid.

"We're back to square one," said Abbas. "We need some time ... but once again we ask our brothers to keep the calm."

Late Sunday, a top Hamas leader in Gaza said his group would stop the rocket fire. But Israeli officials said they would wait to see if things remained quiet before calling off the offensive.

A group of senior Israeli Cabinet officials, led by Sharon, approved the new offensive at an emergency meeting late Saturday after Hamas fired nearly 40 rockets from Gaza at southern Israeli towns.

The assault, which wounded six Israelis, was the first attack from Hamas since Israel completed its withdrawal from Gaza two weeks ago.

Security officials, on condition of anonymity, were reported as saying the Israeli military is preparing for possible artillery attacks and a ground invasion unless the Palestinian Authority or Hamas halts the barrage.

In a further indication the seven-month-old ceasefire is threatened, the Israeli military arrested more than 200 Palestinians in the West bank in an overnight sweep, most of them suspected to be members of the Hamas and Islamic Jihad movements.

Among those arrested were Hassan Yousef and Mohammed Ghazal, two of the most prominent Hamas leaders in the West Bank, Hamas officials said.

Meanwhile, Maj. Gen. Yisrael Ziv, the head of military operations, hinted Israel was preparing to resume assassinations of top Hamas leaders, a practice suspended after the February truce.

When asked whether the leaders were in danger, he said: "Let them decide for themselves."

Hamas responded to the threats, vowing retaliation if they were carried out.

"This escalation and return to a policy of assassinations and arrests and attacking innocent people's homes brings us back to square one," said Mushir al-Masri, a Hamas spokesman in Gaza.

"All options are open, including striking inside the Zionist entity, which would pay dearly and regret that it took on Hamas as an enemy."

The latest cycle of violence began Friday afternoon with an explosion at a Hamas rally in a crowded Gaza refugee camp. At least 15 Palestinians were killed and dozens wounded.

Hamas members blamed Israel for that blast, and said its rocket attacks on Israeli towns were meant as retribution.

Israel dismissed the charges, and the Palestinian Authority held the Islamic militants responsible, saying weapons were mishandled.

The fresh wave of violence dashed hopes that Israel's recently completed Gaza withdrawal would restart peace talks, and increase pressure on Palestinian Leader Mahmoud Abbas to confront the militants.

Amid threats of revenge attacks from militants, Palestinian negotiator Saeb Erekat called on U.S. President George Bush to step in to calm the conflict "so we can sustain the cessation of violence".

In response, the U.S. ambassador in Israel said: "We all know that the terrorists are trying to provoke Israel at a very sensitive time and we understand exactly what the government's position is and the response it has taken."

With a report by CTV's Middle East bureau chief, Janis Mackey Frayer