After cabinet talks with Palestinian President Yasir Arafat on Friday, the Authority called for the United States to send monitors to help get the "road map" peace initiative back on track after a ceasefire was broken by a new round of violence.
"We hold the US government responsible for developments in the coming hours," cabinet minister Yasir Abed Rabbo said after the meeting in the Israeli-occupied city of Ramallah.
He also repeated a long-standing Palestinian demand for international observers to monitor any truce. Israel is vehemently opposed to foreign monitors.
"The United States must play now an active role and to send empowered monitors immediately and intervene to prevent the collapse of the truce, and get back to the road map," Rabbo said.
Earlier, Israeli troops shot dead two Palestinian fighters in a West Bank hospital.
"We hold the US government responsible for developments in the coming hours
Yasir Abed Rabbo, PA cabinet minister
In the West Bank city of Nablus, witnesses said three Palestinian fighters being sought by Israel were sheltering in a small rooftop room of Rafidya hospital when Israeli forces stormed and surrounded the building.
They said a shootout ensued with soldiers firing into the room, killing two fighters and critically wounding the third. All three were members of the al-Aqsa Martyrs Brigades, an armed faction within the mainstream Fatah national movement of Palestinian President Yasir Arafat.
Israeli security sources said the troops targeted fighters who had been hiding in the hospital for some time and were wanted for involvement in a bombing in Israel on 12 August and some resistance attacks in the West Bank.
More strikesThe Israeli authorities have shown no sign of backing off on their announced intention to exact reprisals for Tuesday's Hamas-claimed retaliatory bus bombing which killed 20 Israelis in Jerusalem.
"We will continue to strike terrorists without mercy, those who carry out attacks as well as those who plan them or order them," a senior official told AFP, speaking on condition of anonymity.
A relative grieves beside a poster of Hamas leader Abu Shanab
In the wake of the army's assassination on Thursday of a senior Hamas official, Israeli police re-established two roadblocks on the main north-south route through Gaza, cutting the territory in three. The move came after Hamas's armed wing fired rockets or mortars into Israel and a Jewish settlement in Gaza.
Heavy shooting broke out in the northern town of Jenin after at least 15 Israeli tanks and jeeps moved in but there was no report of casualties. Two Palestinians were reported arrested.
Israeli forces arrested 15 Palestinians overnight and dynamited the family homes of three guerrillas, including a bomber, according to a statement by the military.
Meanwhile, 20 fighters wanted by Israel, who had been sheltering in Arafat's besieged compound in the town of Ramallah, fled into the night for fear of a raid by the Israeli army, a Palestinian security source said.
Thousands march for slain leader
Chanting anti-Israeli slogans and hoisting banners, around 100,000 enraged Palestinians packed the streets of Gaza City on Friday for the funeral of Ismail Abu Shanab, a political leader of Hamas and engineering lecturer, who died with two bodyguards in a volley of Israeli rockets.
Sheikh Ahmad Bahar, a senior Hamas official, addressed the largest such gathering since the Intifada, or uprising, started nearly three years ago and warned Israel that Abu Shanab's death only strengthened his movement.
"The Zionist criminals thought they would terrorise us, but we are warning them and the world that although we mourn the loss of a leader, we have gained hundreds of thousands of mujahedin," he said.
Hamas and Islamic Jihad issued a joint statement on Friday calling off the truce they declared on 29 June and blaming Israel for the upsurge in violence with the complicity of its US allies.
Arafat in demand
The truce, which Israel never formally recognised, has come apart amid two weeks of attacks and counter-attacks in a major setback for moderate Palestinian prime minister Mahmud Abbas, who brokered it on 29 June.
The killing of Abu Shanab has prompted Abbas' Palestinian Authority to reconsider its decision to launch a crackdown on the fighters long demanded by Israel and the United States.
Yasir Arafat (L) may be back in
the driving seat after truce failed
With Israel cutting off all dialogue with the Palestinians, and Abbas estranged from the hardline groups, Washington went back to the familiar figure of Yasir Arafat, to try to rescue the roadmap aimed at ending nearly three years of bloodshed and establishing a Palestinian state.
Barred from direct contact with the veteran Palestinian leader since President George Bush declared him persona non grata in June 2002, US officials made public calls for the Palestinian patriarch's help.
Secretary of State Colin Powell urged him to give Abbas full control of the Palestinian security forces to "allow progress to be made on the roadmap, end terror, end this violence."
Bush freezes Hamas assets
Even as his advisers were petitioning Arafat, President Bush announced a freeze on the assets of six Hamas leaders and five organisations accused of financially supporting the group.
"By claiming responsibility for the despicable act of terror on 19 August, Hamas has reaffirmed that it is a terrorist organisation committed to violence against Israelis and to undermining progress toward peace between Israel and the Palestinian people," Bush said.
While chief US peace watchdog John Wolf pressed his talks with both Israelis and Palestinians, Arafat met at his battered Ramallah headquarters with Usama al-Baz, Egyptian President Hosni Mubarak's top adviser, who also saw Abbas on prospects for crafting a new truce and resurrecting the peace process, Palestinian officials said.