Security sources and diplomats say new weapons and equipment can be seen on the streets of Gaza and the West Bank, while prices for black market guns and ammunition have soared in a growing arms race despite pledges by both sides to prevent civil war.

Mouin Rabbani, senior Middle East analyst for the International Crisis Group, said: "These kinds of preparations have the ability to spin out of control and could produce exactly what they're trying to prevent."

But Yaser Dajani, a Palestinian security consultant, who sees the build-up as sabre-rattling rather than a prelude to a full-scale conflict, said: "It's like flexing your muscles."

Tensions have grown since Mahmoud Abbas, the president, threatened to call a referendum on a manifesto for statehood that implicitly recognises Israel if the Hamas-led government persists in rejecting it.

Rival forces have clashed sporadically in Gaza.

Power struggle

Western powers want to ensure that Abbas emerges victorious in any power struggle with Hamas, which is formally committed to destroying Israel rather than creating a state alongside it.

"[The situation] is not only delicate, it is also dangerous"

Mustafa Barghouthi, 
Palestinian politician

With US encouragement, Israel has agreed to let Egypt and Jordan supply Abbas's presidential guard with small arms and ammunition. Spain has promised to send a fleet of four-wheel-drive vehicles to bolster the guard.

In the occupied West Bank city of Ramallah, where Abbas has his headquarters, the guard recently acquired four new US-made armoured vehicles worth an estimated $100,000 each.

"It is no secret that [Abbas] is arming himself for a confrontation with his rivals," said a veteran of Israel's Shin Bet security service, which helped CIA-led efforts in the 1990s to bolster the forces of Yasser Arafat, who was then the president, against Hamas.

Palestinian security sources say Hamas is also buying more weapons and training more fighters in the West Bank, where the forces of Abbas's Fatah group have long been dominant.

Financial embargo

The government is under a Western financial embargo aimed at forcing Hamas to recognise Israel and renounce violence.

But Hamas has been able to smuggle weapons and tens of millions of dollars and euros through the Egyptian border with Gaza, Israeli intelligence sources said.

In Gaza, where it has enough guns, Hamas has been buying bullets, Palestinian security sources said.

Arms dealers and an Israeli military source said black market bullets were selling for $1 each - a steep price in areas where up to half the people live on less than $2 a day.

Weapons

In the West Bank, Hamas has been buying M-16 rifles. Dealers said heavy demand and a lack of supply have sent prices soaring to as much as $13,000 each, up from $5,400 a year ago.

At the border with Gaza, Israeli forces say fighters have acquired hundreds of anti-tank missiles.

The forces have also been recruiting.

Fatah is distributing weapons to some local offices to help protect officials and property, sources in the group said.

Mustafa Barghouthi, an independent Palestinian politician, said the situation "is not only delicate, it is also dangerous", adding: "People are not only worried, they're angry. They are angry at this polarisation."