Palestinians say Israeli warplanes have attacked security installations in Gaza City injuring at least two people.
The incident is believed to have happened close to Palestinian leader, Yasser Arafat’s seaside headquarters.
It comes after a Palestinian suicide bomber detonated explosives in a Tel Aviv shopping centre, killing and wounding 24 others.
The tension follows George W. Bush’s threat to sever ties with the Palestinian authority after it tried to smuggle weapons into the region.
The US President is said to be disappointed by the actions of Yasser Arafat.