Militants fired at least three rockets into northern Israel from Lebanon today, prompting the Israeli military to retaliate and raising fears that the 13-day-old war in Gaza could spread.

The Katyusha rockets were fired at the resort town of Nahariya, five miles south of the border, and at least two Israeli civilians were slightly injured. Israel responded with artillery fire. The authorities closed schools in the area and advised residents to stay close to shelters.

It was not immediately clear whether the rockets were fired by radical Palestinian groups based in Lebanon or by Hizbollah, a militant Islamic organisation allied to Hamas, the group Israel is trying to crush in the Gaza Strip.

Hizbollah had no immediate comment. Hamas, which fired rockets from the Gaza Strip into southern Israel almost simultanously, denied responsibility. Unifil, the UN peacekeeping force which controls the border area of southern Lebanon, said it was investigating.

In 2006 Israel invaded southern Lebanon and fought a bloody but inconclusive 34-day war against Hezbollah. Since then there have been only occasional rockets fired into northern Israel, but Israel has been on high alert for any attempt by Hezbollah to relieve the pressure on Hamas during Operation Cast Lead by opening a second front and has warned of dire consequences if attacked.

The rocket attacks came one day after Hassan Nasrallah, Hezbollah's leader in Lebanon, delivered a bellicose address to thousands of supporters via a videolink from his Beirut headquarters.

"We have to act as though all possibilities are real and open (against Israel) and we must always be ready for any eventuality," he said.

"I say to (Israeli Prime Minister Ehud) Olmert, the loser, the vanquished in Lebanon (in 2006) that you cannot overcome Hamas or Hezbollah. Your 2006 war will be but a walk in the park compared to what we have prepared for you in the event of a new offensive.

"We are ready to sacrifice our souls, our brothers and sisters, our children, our loved ones for what we believe in," he continued. "We will not abandon the fight or our weapons."

The rocket attack on northern Israel followed a night in which the sustained Israeli bombardment of the Gaza Strip targetted some 300 tunnels on the Egyptian border that Hamas uses to smuggle in arms and other supplies. Israeli tanks were also reported to be advancing on the town of Khan Younis.

Later today two top Israeli officials will travel to Cairo to discuss details of a ceasefire plan proposed by Egypt and France and backed by the United States. Representatives of Hamas and the Palestinian Authority are also expected in Cairo.

Diplomats in New York worked on a U.N. Security Council statement backing the cease-fire initiative, but analysts see little chance of a swift end to the fighting in Gaza which has cost nearly 700 Palestinian lives and driven thousands from their homes. Ten Israelis, including three civilians, have been killed.

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