The killing of eight Israelis by a Palestinian in the worst attack in Israel in years sparked fears that violence that has escalated since Ariel Sharon was elected prime minister could spin out of control.
Four female soldiers, three male soldiers and a civilian were killed and 17 other people were injured on Wednesday when 35-year-old Palestinian driver Khalil Abu Elba slammed a bus into a crowded bus stop south of Tel Aviv.
The attack was the worst since two suicide bombings in a Jerusalem market in 1997. It prompted Israel to tighten a blockade of Palestinian areas and U.S. President George Bush to appeal for an end to the "tragic cycle of violent action".
The driver fled but was captured with leg injuries after a 30 km (19 mile) chase when his bus crashed into a truck. He had been employed driving Palestinian workers to Israel for five years.
Grieving families began burying their dead late on Wednesday and funerals for the other six victims were planned for Thursday.
Violence has risen since Sharon defeated Ehud Barak in a landslide victory for the premiership in a February 6 vote.
The head of Israel's armed forces, Shaul Mofaz, said security agencies were bracing for an escalation, and he called on the Palestinian Authority to arrest dozens of militants released after a Palestinian uprising erupted in late September.
Palestinian officials said "Israeli aggressions" were to blame for the attack, which came a day after an Israeli helicopter strike killed a senior Palestinian security officer, who Israel said was an agent for the Hizbollah guerrilla group.
BUSH CALLS FOR END TO TIT-FOR-TAT ATTACKSBush called on Israel and the Palestinians to stop tit-for-tat attacks that have become the norm since the start of the unrest nearly five months ago in which more than 300 Palestinians, 61 Israelis and 13 Israeli Arabs have died.
"The tragic cycle of violent action and reaction between Israel and the Palestinians, particularly the escalation this week, needs to stop," Bush said in his first formal statement on the Middle East since taking office on Jan. 20.
The European Union urged Israel and the Palestinians to act "with maximum restraint, restore calm and do their utmost to prevent actions resulting in new victims".
Arafat, on a visit to Ankara, stopped short of condemning the bus attack but said he was against the use of violence. Palestinian cabinet minister Nabil Shaath, accompanying him, told Reuters: "We condemn that act whether it was an accident or not."
Arafat's failure to condemn the attack angered Israel.
"Arafat is directly responsible...He is directly responsible for the bloodbath," Israeli President Moshe Katsav said.
Sharon told French President Jacques Chirac in a telephone call that Arafat was "directly responsible" because he didn't crack down on Palestinian militants, Israel Radio reported.
Israeli officials said they were not sure if the bus driver, acted alone or on behalf of a militant group.
A group called the Guverra brigade, connected to the Popular Front for the Liberation of Palestine, said in a statement it was behind the attack. A PFLP official said Abu Elba was a member of the group which opposes peacemaking with Israel.
ISRAELIS KILL PALESTINIAN POLICEMAN
A Palestinian policeman killed by Israeli troops in the West Bank was also due to be buried on Thursday. Palestinians said he was trying to clear an Israeli roadblock when he was shot. The army said he was with a group of gunmen on their way to an attack.
In other violence, Palestinian gunmen shot and wounded a Jewish settler near Hebron late on Wednesday, three roadside bombs exploded, one on a road near Jerusalem, and a handgrenade was thrown at Israeli soldiers in southern Gaza. No-one was injured.
Sharon, who Arabs revile for orchestrating the 1982 invasion of Lebanon, only takes over power from Barak once he forms a government. Israeli radios said his efforts to put together a unity government with Barak's centre-left Labour Party were close to fruition.
Negotiations on a coalition that would be more receptive to peacemaking with the Palestinians then the right-wing Likud leader's other alternative, a rightist bloc, have gained impetus from the violence.
Barak, said there was "a good chance" a unity government would be formed as that was the desire of the Israeli people.