Hamas gunmen stormed the Gaza crossing into Egypt last night after Israel refused to allow their leader to enter Gaza carrying $35 million (£18 million) in cash collected from Iran, Syria and other Arab countries.

Ismail Haniya, the Palestinian Prime Minister, had been on a fundraising trip of the Islamic world to try to circumvent international sanctions that have left his Government broke and unable to pay 165,000 civil servants for months.

European monitors at Rafah raised no objection to his bringing the money into Gaza, so long as it was declared. Israel blocked his entry because it feared that the cash would be used to fund terrorism. Israel, in common with the US and EU, regards Hamas as a terrorist organisation.

The stand-off led to violence when hundreds of Hamas supporters raced to the passenger terminal to assist Mr Haniya, shouting: “God is great, let’s liberate this place.”

Palestinian security officials blew a hole in the border fence near the crossing, and exchanged fire with their Fatah-dominated rivals in Mahmoud Abbas’s Presidential Guard.

One of Mr Haniya’s bodyguards was killed as his convoy sped from the scene in pickup trucks. Hamas officials claimed that he died protecting Mr Haniya from an attempt to kill him. Mr Haniya’s son, Abed, was also injured.

Hospital officials said that at least 27 people were wounded in the fighting, at the border. Witnesses said that terrified passenger hid behind walls and taxis while the gun battle raged as both sides fought for control of the border crossing.

The violence bodes ill for any chance of restarting talks to form a national unity government. When he got home at midnight — having secured his passage by agreeing to leave the money in an Egyptian bank — a furious Mr Haniya said: “We know the party that shot directly at our cars, injuring some of the people with me . . . and we also know how to deal with this.”

Mr Haniya’s tour had included a stop in Iran, where he announced that Tehran had donated $250 million. He then went to Khartoum, where he said the Sudanese regime had extended $10 million in aid to the Palestinians.

The donations came after an announcement by Arab League nations that they would no longer abide by the financial embargo imposed on the Palestinian Authority after Hamas came to power in May. These have included US threats of sanctions on bank transfers.

Mr Haniya is by no means the first prominent Hamas official to bring huge amounts of cash into Gaza. Last month Mahmoud Zahar, the Foreign Minister, carried $20 million stuffed into 12 suitcases, also after returning from Iran. Two Hamas MPs also brought in $4 million last month.

Hamas insists that it hands the cash straight to the Finance Ministry to pay salaries, but Israel fears that the funds could be used for nefarious purposes.

Israeli officials refused to say whether there had been a formal change of policy since Dr Zahar’s trip, but confirmed that they were reassessing the arrangements.

Mark Regev, a Foreign Ministry spokesman, said: “The idea is that we don’t want cash going into Gaza because it can go straight to the armed elements and be used to strengthen the terrorist infrastructure. It is true that cash has come in in the past. That is bad.”

The arrangements at Rafah — Gaza’s only lifeline to the outside world — are complex. Controlled by Israeli troops until Israel withdrew its 8,000 Jewish settlers from Gaza last year, the crossing is now operated by Egyptian and Palestinian forces supervised by EU monitors (Eubam). All other Palestinian land, sea and air crossings into the 40km (25 mile) strip are controlled by the Israeli military.

While no Israeli soldiers are present at Rafah, Israel can shut the crossing simply by withdrawing its liaison officer monitoring proceedings at a nearby military post.

After darkness fell last night Hamas officials urged their angry followers to go home, reminding them that the crossing could not be reopened until European monitors felt it was safe enough to return.

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