The Jerusalem religious school which was attacked by a Palestinian gunman last week has refused to allow Ehud Olmert to visit to pay his condolences, saying that the Prime Minister’s land-for-peace talks with the Palestinians were a betrayal of the seminary’s nationalist goals.

Rabbi Haim Steiner, whose Merkaz Harav yeshiva is still struggling to recover after a gunman killed eight young students last week as they prepared for a religious festival, said Mr Olmert would not be welcome.

"We cannot receive a Prime Minister who advocates against the spirit of the Torah and accept that Israel withdraws from a part of the land of Israel," said Mr Steiner, a senior official at the yeshiva, a cornerstone of the religious settler movement in the West Bank.

Mr Olmert is in fragile talks with the Fatah leadership of the West Bank to create an independent Palestinian state on land which religious nationalists consider to be part of their biblical birthright.

The day before, Yuli Tamir, the Education Minister and a former member of the anti-settlement group Peace Now, was heckled and jostled by crowds when she went to express her condolences after the attack, the bloodiest inside Jerusalem in four years. As religious students shouted "murderer" and "traitor" at her, one of them tried to hit her before being blocked by her bodyguards.

"I have never been confronted with such hate," she said afterwards, comparing the frenzy to the run-up to the assassination of Yitzhak Rabin, shot dead by an extreme-right Israeli gunman in 1995 after he had signed the Oslo peace accords.

Meanwhile, Israeli police have refused to hand over the body of the East Jerusalem gunman who carried out the shooting rampage until his family pledges to hold a modest funeral and wake. Some right-wing Israeli politicians have also called for the killer’s family home to be destroyed and his relatives denied residency in the predominantly Arab part of the disputed city.

After the bloody flare-up in violence over the past two weeks, a tentative calm has somewhat eased fears that a third Palestinian intifada, or uprising, was in the offing. Following increased Hamas rocket attacks from Gaza and a devastating Israeli incursion into the southern territory, missile fire and Israeli raids have dropped off, as Egyptian envoys work frantically to calm the situation.

Both sides were at pains to deny speculation of a ceasefire. But Israeli military officials have been instructed by the Government to hold off from further attacks in the Islamist-held Gaza Strip unless Hamas fires first.

While Hamas stressed that it reserved the right to launch more attacks in response to Israel’s blockade of Gaza, militants have only fired three Qassam rockets since Friday, down from close to 50 a day last week. Sources in Gaza said the Islamists were waiting to see what kind of agreement Egypt might broker.

Mr Olmert insisted that no deal had been done. "There is an unequivocal demand that hasn't changed, and if this demand is fulfilled, there will be no need for a ceasefire," he said. "If the terror stops, if the Qassams stop landing on residents of Sderot and if Grads (Iranian-made missiles) stop landing on Ashkelon... Israel will have no reason to fight the terror organisations there."

Many Israeli security officials worry that even a long-term ceasefire will only allow Hamas to consolidate its position, smuggling in longer-range Iranian rockets and training its guerrillas in advanced tactics to combat future Israeli incursions.

Yuval Steinitz, an MP with the right-wing opposition Likud, said that any lull was a win for Hamas. "I have to say this morning with regret: well done Hamas. The real significance of the cease-fire is a victory for Hamas. There is only one possible meaning — that we are willing to accept a Palestinian state, or a state at least in Gaza, armed in contravention of all the demilitarization agreements, and to agree to establishment of an Iranian outpost. For Hamas is a proxy of Syria and Iran."

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