"There is no doubt that this signals a certain escalation in the activity of terror organisations in Gaza," Olmert said.
"The defence ministry has instructed the security services to strengthen Israel's reaction, which has already been firmer in recent weeks."
The 122mm rocket landed about 15km from inside Israel without causing any casualties or damage, the Israeli army said.
Refugee camp incursion
Wael al-Dahduh, Al Jazeera's correspondent in Gaza, said the latest Israeli orders will represent nothing new for the Palestinians on the ground.
The seven Palestinians were killed during an incursion east of the al-Bureij refugee camp, where Israeli jeeps, armoured vehicles and bulldozers backed by helicopters began operating early on Sunday morning.
|"The defence ministry has instructed the security services to strengthen Israel's reaction, which has already been firmer in recent weeks"|
Israeli Prime Minister
One of the victims, 17-year-old Ziad Abu Raqba, died after being shot in the chest during the incursion, medics said.
They said the teenager was not a member of any armed group.
An Israeli military spokeswoman said troops shot several armed men. She had no immediate word on the civilian casualties.
An air strike on a house killed Iman Hamdan, a 34-year old woman, and Mahmud Abid, an 18-year-old member of the armed wing of Hamas, according to medics.
While a fourth man, Ahmed Khalaf, was killed by a tank shell as the fighting continued past sundown, with helicopters and tanks laying down a heavy barrage of fire in the area of the operation.
The fighting also wounded at least 25 Palestinians, including four women, a child and nine fighters. Several Israeli soldiers were wounded by an anti-tank grenade fired at their vehicle.'Israeli escalations'
The Palestinian Authority condemned "Israeli escalations" just days before George Bush, US president, visits the region in an attempt to bolster peace talks that were renewed at a conference in Annapolis last year.
"We call on Israel to halt its military operations in the West Bank and Gaza Strip," Salam Fayyad, the Palestinian prime minister, said.
|At least 25 Palestinians were wounded |
in the incursion into al-Bureij [AFP]
Saeb Erakat, senior Palestinian negotiator, said Mahmoud Abbas, the Palestinian president, would demand that they be stopped when he meets Olmert a day before the US president arrives.
"The peace process cannot be successful unless there is a stop to settlements and Israeli escalations against the Palestinian people."
Ignoring the protests from the government of Mahmoud Abbas, the Palestinian president, Olmert said Israel would continue to operate against armed groups in both the Gaza Strip and the West Bank, where Abbas's Fatah is dominant.
"We will continue to react and to initiate actions by our forces in order to hit terror elements and to reach those who are responsible in every corner of Gaza and also in Judea and Samaria [the West Bank]," he said.
Meanwhile, a Palestinian official said that Gazans would have their electricity cut for eight hours every day because of Israeli fuel cutbacks aimed at increasing pressure on Hamas.
Over the past few months, Israel has cut fuel shipments to Gaza's only electricity plant and the deputy director of the power authority told Al Jazeera that it would be unable to provide the territory's winter needs.