GAZA CITY, Gaza Strip - In a day of incendiary violence that left Mideast peacemaking in ashes, Israeli helicopters rocketed Palestinian leader Yasser Arafat's compound Thursday in retaliation for the mutilation of three Israeli soldiers by a mob of enraged Palestinians.
The day began with U.N. Secretary-General Kofi Annan and CIA chief George Tenet trying to broker a truce to end two weeks of daily fighting. But it degenerated swiftly, with both sides unleashing pent-up rage.
The Palestinians inflicted the worst losses yet on Israeli troops, while Israel's combat helicopters staged unprecedented attacks on high-profile Palestinian targets and tanks rumbled to the outskirts of Palestinian cities.
One Israeli rocket struck 150 feet from Arafat's seaside residential headquarters, with the Palestinian leader inside at the time, his aides said.
''This is a declaration of war - a crazy war,'' said Saeb Erekat, a senior Palestinian official.
Israeli Prime Minister Ehud Barak said Arafat ''does not appear to be a partner for peace at this time.''
Barak said he held Arafat indirectly responsible for the killing of the soldiers, and said Israel would hunt down those involved. He demanded that the United States publicly affix blame to Arafat for the collapse of the peace talks and the escalation of violence.
Barak also renewed calls to the hawkish opposition party Likud to join an emergency coalition. Likud has rebuffed Barak in the past, saying it would join only if he abandoned the peace talks. However, opposition leader Ariel Sharon - whose visit to a contested Jerusalem shrine two weeks ago triggered the violence - met with Barak Thursday.
Thursday's turmoil appeared to extinguish hopes that Israel and the Palestinians could soon negotiate a truce and bring an end to 15 days of bloodshed that have left at least 95 people dead, the vast majority Palestinians.
The attack on Arafat's compound and other key Palestinian targets was the first major Israeli assault on important Palestinian sites since Arafat returned to the region in 1994 and the two sides launched negotiations aimed at a comprehensive settlement.
A smiling, defiant Arafat was cheered by hundreds of Palestinians as he toured the Gaza sites hit by rockets, including a power station, a government building and a police station.
''Our people don't care, and don't hesitate to continue their march to Jerusalem, their capital of the independent Palestinian state,'' he said.
While Israelis and Palestinians traded sharp words, Annan made a seemingly futile plea for calm.
''I appeal to all - leaders and citizens alike - to stop and think about what they are doing today and what kind of tomorrow they want for their children,'' he said. After a brief trip to Lebanon on Thursday, Annan returned to Israel to deal with the crisis.
The violence had been waning this week, but erupted anew when Israeli reservist soldiers made a wrong turn and ended up near the center of the West Bank town of Ramallah, a flashpoint of fighting between Israeli troops and Palestinian rioters.
The soldiers, traveling in a civilian car, were chased by Palestinians and sought shelter in the Ramallah police station. Word of their presence spread, and more than 1,000 Palestinians surged toward the building.
Palestinian forces tried to keep the mob at bay, but about 10 men broke through a second-floor window where the Israelis were held. The attackers soon emerged with blood-covered hands as the crowd roared with approval.
The body of one Israeli soldier was thrown into the street, and a second was dangled down by a rope, where the corpse was stomped and beaten with iron bars. From the window, Palestinians shook their fists and flashed gleeful ''V for victory'' signs. Both bodies were soaked in blood.
There was continued confusion about the number of Israeli soldiers killed. The army said two bodies were handed over to Israel. However, Barak later told CNN that three soldiers were ''lynched and mutilated.''
Before Thursday, only one Israeli soldier had been killed in the fighting.
''The brutal lynching in Ramallah is a very grave incident,'' said Israel's acting foreign minister, Shlomo Ben-Ami. ''More than just escalating the explosive situation, the event shows a lack of respect for human life.''
Israel's army said the helicopter strikes were a ''limited action designed to respond to the barbaric act Palestinians conducted this morning.'' Deputy Defense Minister Ephraim Sneh said Israel did not intend to ''conquer'' territory in the West Bank and Gaza Strip under Palestinian security control.
Still, the assault showed Israel was prepared to use heavy weaponry the Palestinians do not possess.
The Israeli forces first targeted the police station and the Palestinian TV headquarters in Ramallah. Black columns of smoke rose from the city, and at least 12 people were injured, the Palestinians said.
In Gaza City, Arafat's headquarters and buildings near it were hurriedly evacuated. Shortly afterward, a guard house next to the residence was hit, and smoke rose above the compound. Residents sprinted from nearby buildings.
Barak said Arafat himself was never a target in the helicopter attacks.
Palestinian officials said the attack came shortly after Tenet, the CIA chief, met with Arafat in Gaza City. Palestinian Justice Minister Freih Abu Medein said the Israelis waited for Tenet to leave Gaza before they unleashed the rockets. However, U.S. officials in Washington said Tenet was en route to the meeting, but canceled when told it may be unsafe.
In Ramallah, the Palestinian police station was reduced to rubble after being hammered by the rockets, and flames poured out of a second building. An angry mob gathered outside the station, shouting ''God is great,'' and raising a Palestinian flag on a damaged wall.
After nightfall, Israeli helicopter gunships rocketed the Palestinian police academy in the West Bank town of Jericho, apparently in retaliation for the burning of an ancient synagogue in the biblical oasis. Jericho was plunged into darkness by the missile hit.
Fighting continued into the night. Combat helicopters attacked the main compound of the Palestinian security forces in Nablus. Police officers fled into the street before the shooting began. A firefight erupted in the West Bank town of Hebron, and gunships attacked gunmen in the town of Salfit near Nablus.
Israel also clamped an internal closure on the West Bank, meaning Palestinians could not leave their communities.
In another development, the Palestinian Authority released hundreds of prisoners, including scores of Islamic militants, from jails in the West Bank and Gaza Strip. The releases put Israel on high alert. ''This is a grave act that increases the probability of terror attacks,'' Barak said.
The Dow Jones industrial average plunged about 380 points Thursday while the Nasdaq composite index recorded its lowest close this year, as jittery investors reacted to the escalating violence in the Middle East.