The bodies of the four militants were laid out in front of the Holy Land Christian souvenir shop, one of them wrapped in a Hezbollah flag.

Thousands of Palestinian mourners jostled to bid farewell to the dead men, killed the night before by Israeli special forces. As prayers for the deceased ended, the tolling of bells from the Church of the Nativity, on the site where Jesus is believed to have been born, mingled with the softly chanted Allahu akbar of the mourners.

“Don't talk about peace,” said Samir, a 35-year-old history teacher in the crowd in Manger Square, Bethlehem. “The Israelis don't understand peace.” The four men, three from Islamic Jihad and one from a Fatah splinter group, had been shot dead by an undercover Israeli unit in central Bethlehem.

All had been wanted by Israel for eight years for killing Israelis during the opening days of the intifada.

Blockade drains life from Gaza

The movement of goods into Gaza had been intermittent at best since Hamas won Palestinian elections early last year

BACKGROUND

• Israel continues Gaza blitz as 310 dead

• Q&A: Hamas and Gaza

• 97 days and counting for BBC's man in Gaza

• Now war is with the enemy within

• The little girl trapped by a quirk of war

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• Israeli massacre school blocks Olmert visit

• Fears of 'third intifada' as Israel buries victims

• Israel remains defiant as Gaza toll rises

Within hours Palestinian militants were firing rockets from Gaza into southern Israel, and Israeli planes flew raids to hit rocket squads in northern Gaza. Ehud Barak, the Israeli Defence Minister, appeared unconcerned that an Egyptian-brokered truce with Palestinian armed groups was over. “Yesterday in Bethlehem we again proved that the state of Israel will continue to hunt and to strike any murderer who has Jewish blood on his hands, and those who send him. It is unimportant how much time has elapsed,” he said.

This week Mahmoud Abbas, the Palestinian President, accused Mr Barak of being opposed to peace talks and called Israel's raid barbaric. He said that if no peace deal was reached by the end of the year “the situation could be catastrophic”.

In Dakar Ban Ki Moon, the UN Secretary-General, accused Israel of “inappropriate and disproportionate use of force” in its raids inside the Gaza Strip which killed more than 120 Palestinians last week, including women and children. He called for a ceasefire to be respected by both sides.

As the crowd paraded the bloodied corpses of the militants around the main square during one of the largest and angriest funerals in Bethlehem in years, a speaker called for the city's men to rise up against Israeli occupation. “After they killed these people they should expect a third and a fourth intifada!” shouted a representative of the militant groups.

The body of the most senior of the dead men, Muhammad Shehadeh, was wrapped in a Hezbollah flag, while the emblem of the Lebanese Shia militia also fluttered from the rooftops. Hezbollah flags appeared last week at the funeral of a gunman from East Jerusalem who killed eight Israeli students in a Jerusalem seminary, an ominous sign for Israel.

Muhammad Farhad, a sociology professor among the mourners yesterday, said: “The Israelis make a future full of violence. They have lost wisdom.”

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