The Palestinian Authority is already in a heightened state of alert after the raid on the Jericho jail provoked a wave of abductions and threats of revenge against the Jewish state.
The strike was ordered late on Tuesday after emergency talks in the Gaza Strip, and on Wednesday most businesses were shuttered and schools were closed.
The siege by Israel succeeded in its aim of capturing Ahmad Saadat, the leader of the resistance movement, the Popular Front for the Liberation of Palestine (PFLP), but has sparked an angry reaction.
Three foreign captives - two French and a Korean - were being held by Palestinian fighters in the Gaza Strip after the raid, and much of the backlash has been directed at British and US interests.
Saadat surrendered to Israeli troops late on Tuesday along with 5 other jailed Palestinian political activists.
Israel holds the five PFLP members responsible for the killing of an Israeli minister in October 2001.
Two Palestinian security guards were killed and 26 others wounded, five of them critically in the assault.
Call for calm
A US State Department spokesman urged both sides to exercise "calm and restraint" amid mounting questions over why the international monitors at the prison were removed just minutes before the raid. The UN Security Council also called for calm.
The president of the European Parliament roundly condemned Israel's massive raid on the prison and the wave of kidnappings of foreigners that followed it.
Palestinian security forces, issued with orders to respond with live fire to attacks against Western interests, were on high alert to prevent a repeating of the security anarchy.
Abbas (L) cancelled his European
tour after the Israeli raid
Israeli troops had pounded the prison compound with tank and missile fire throughout the day in an attempt to force the prisoners out of their cells.
The operation came minutes after the three British monitors, part of a team that normally also includes Americans, were withdrawn from the prison, prompting furious charges of collusion from the Palestinians.
Jack Straw, the British foreign secretary, denied the charges, saying the monitors were pulled out for their safety, but Palestinians argue that those monitors were initially installed to provide safety.
Hundreds of Palestinian fighters reacted to the Israeli action by storming the British cultural centre in the Gaza Strip and setting fire to it, while angry Palestinian activists stormed into an American centre for teaching English in Gaza City.
In the West Bank town of Ram Allah, the British cultural centre and a branch of HSBC bank were also attacked.
Palestinian security forces said all foreigners still at liberty had now left the Gaza Strip after being gathered at the police headquarters in Gaza City for their own safety.
Mahmoud Abbas, the Palestinian president, abandoned a European tour late on Tuesday, and flew back from Strasbourg as the unrest flared.
Saadat and three other PFLP members had been jailed in Jericho, a prison under US and British supervision since August 2002, after his resistance faction claimed the 2001 killing of the Israeli tourism minister Rehavam Zeevi.
A South Korean and two French journalists were taken captives from a luxury Palestinian hotel on the Gaza City seafront.
The two French journalists were identified as Caroline Laurent, a correspondent for Elle magazine, and SIPA agency photographer Alfred Yacobzadeh, who was facing his second hostage ordeal after being kidnapped in Beirut during the 1975-90 Lebanese civil war.
Israeli troops stormed a Jericho
prison on Tuesday
The Foreign Ministry in Seoul named the abducted Korean as Yong Tae-young, 41, a correspondent for public broadcaster KBS.
Gideon Ezra, the Israeli public security minister, said the prison raid was undertaken to prevent the resistance leaders from going free after Abbas repeatedly suggested he would be ready to release them in recent weeks.
Palestinian chief negotiator Saeb Erekat condemned what he described as a "kidnapping operation" and held Britain and the United States responsible for the safety of the PFLP leader, whose predecessor Abu Ali Mustafa was assassinated by Israel in 2001.