JERUSALEM, March 9: Israeli intelligence agencies painted a bleak picture of threats facing the Jewish state in an annual assessment on Sunday that came on the heels of the deadliest Palestinian attack in Jerusalem in four years.

Arch-foe Iran and its controversial nuclear programme remain the main threat seen by the Jewish state, while rocket fire from Hamas-run Gaza is the most active front it is facing, a senior official quoted intelligence chiefs as telling the weekly cabinet meeting.

“The main strategic threats are from Iran through its nuclear programme and the pivotal role it is playing as a leader of the radical axis in the Arab and Muslim world,” the official quoted the annual report as saying.

The Islamic republic is also increasing its cooperation with other foes Syria, Lebanon’s Hezbollah and Palestinian militant groups, he said.

While rocket fire from Hamas-run Gaza is the most “active front Israel is facing today,” a widescale offensive by Israel in the coastal strip would likely lead to a flare-up of violence with Hezbollah, as was the case in 2006.

“If Israel launches a broad operation in Gaza, that could lead to violence on other fronts, most notably from Hezbollah,” the official said.

In late June 2006, Israel launched a major operation in Gaza after militants tunnelled out of the coastal strip and seized a soldier in a deadly raid.

Two weeks later, Hezbollah seized two soldiers in a separate deadly cross-border raid in Israel’s north, leading the Jewish state to launch a massive 34-day offensive inside Lebanon.

Its stated aims were to recover the soldiers and halt rocket attacks into northern Israel. Neither was achieved.

Sunday’s assessment comes just days after a Palestinian gunman shot dead eight students, mostly teenagers, at a Jewish theological school. The attack on Thursday was the deadliest in the Holy City since February 2004.

Israeli police on Sunday remained on a state of alert, while the army maintained a closure of the West Bank that it imposed after the shooting.

In the wake of the attack, a hardline minister called for the revocation of the residency permits of the family of the man who carried out the attack, a Palestinian from east Jerusalem with the blue Israeli identity card that allowed him free movement across the country.

“We should pass a resolution or change the law if necessary so that the family of anyone who carries out an attack... should have their residency permit immediately revoked and their homes destroyed,” Eli Yishai, trade and industry minister from the ultra-Orthodox Shas party, said in a statement.

During the annual intelligence assessment, the head of the Shin Beth internal security services said that 25 Arab Israeli had been arrested in 2007 over suspected links to militant groups in the West Bank.

Thursday’s attack threatened to derail international efforts to negotiate a truce between the Israeli army and Palestinian militants and to advance faltering peace talks.

But both Israeli and Palestinian officials told AFP on Saturday that the peace negotiations — relaunched to much fanfare in November but stagnant ever since — will resume next week despite the violence.

The talks received a new blow on Sunday, however, with Israeli Prime Minister Ehud Olmert giving his approval to the expansion of the Givat Zeev settlement in the occupied West Bank to the fury of the Palestinians.

“With this decision, Israel wants to demolish the peace process and demolish the international efforts to advance the peace process,” senior Palestinian negotiator Saeb Erakat said.

There has been a sharp upsurge in violence around the Islamist-controlled Gaza Strip since Feb 27 when an Israeli raid killed five Hamas militants, prompting a barrage of retaliatory rocket fire against southern Israel.

Since then, at least 132 Palestinians have died in Israeli attacks, including several dozen children. Four Israeli soldiers and one civilian have died over the same period.

In the past week, efforts have been under way in Egypt to work out a ceasefire between Israel and Palestinian militants.

Senior Israeli defence ministry official Amos Gilad was in Cairo on Sunday for talks on the situation in Gaza, Egyptian presidential spokesman Suleiman Awad said.

Last week delegations from Hamas and Islamic Jihad were in Egypt for similar talks and senior US State Department official David Welch also held talks on the issue in Cairo.—AFP