(Hatem Moussa ~ Associated Press)
The decision gave a five-month cease-fire one last chance to succeed, despite repeated warnings by military officials that Hamas has been using the lull in fighting to smuggle large amounts of weapons into Gaza. But Israeli officials warned of "harsh steps" if the rockets keep falling.
In a separate development, the government's chief watchdog recommended opening a criminal investigation into a 2001 government transaction that involved Olmert before he became prime minister. The announcement further weakened the embattled Israeli leader ahead of a potentially explosive inquiry report next week on last year's war with Hezbollah guerrillas in Lebanon.
Olmert and Palestinian President Mahmoud Abbas announced the Gaza truce in late November, declaring an end to Palestinian rocket fire and Israeli attacks, including airstrikes.
Some Palestinian militant groups have continued sporadic rocket attacks but Hamas, which leads the Palestinian coalition government, has kept its distance from the violence. According to the Israeli army, militants have fired 230 homemade rockets at Israel since the truce, compared with about 600 launchings in the five months before the deal. The rockets have caused no serious injuries since the truce.
(Emilio Morenatti ~ Associated Press)
Eight Palestinians were killed in fighting in the West Bank last weekend, and another was killed in a rare missile strike at a Gaza rocket squad. Palestinian officials said two civilians were among the dead.
With tensions rising, Olmert convened an emergency meeting of senior security officials Wednesday to discuss a response.
Meeting participants said Israel would limit its activity to "pinpoint" operations aimed at halting rocket fire and other threats -- effectively maintaining its policy of recent months.
Olmert's spokeswoman, Miri Eisin, said there would be no large-scale military raid in Gaza for the time being.
"They didn't plan any operation," she said. "They decided to leave all options open."
Hamas already has threatened more attacks, with its spokesman saying Tuesday it was ready to kidnap and kill more Israeli soldiers.
The head of the Egyptian security delegation, Col. Burhan Hamad, met Wednesday with leaders of factions, including Hamas, Fatah and Islamic Jihad, and urged them to maintain the truce.
"I explained to them the dangers. I hope they are convinced," he told AP by phone.
Senior intelligence officials, including the head of Israel's Shin Bet internal security service, have warned in recent months that Hamas -- which has killed hundreds of Israelis in suicide bombing attacks -- is preparing for all-out battle.
They say Hamas has used the lull to smuggle some 30 tons of explosives through tunnels from neighboring Egypt into Gaza. They also say Hamas has sent militants to Iran for training.
Senior military officials have called for a wide operation in Gaza to pre-empt Hamas. Others, however, have questioned the wisdom of sending ground troops into Gaza's crowded urban landscape. Similar operations since Israel withdrew from Gaza in 2005 have failed to halt the rocket fire.
Renewed fighting would be risky for both sides.
As a member of the Palestinian unity government, Hamas has been trying to win international legitimacy to get economic sanctions lifted. With the U.S. and European Union already classifying Hamas as a terrorist group, a new round of fighting would do little to help the group's cause in the West.
Olmert, meanwhile, has been weakened by last summer's war in Lebanon, as well as corruption allegations.
On Wednesday, state comptroller Micha Lindenstrauss issued a lengthy report charging that Olmert used his influence to steer a government grant to a colleague while he was trade minister in 2001. Olmert also has been accused of shady real estate deals and improperly intervening in a bank privatization deal.
In a statement, Olmert's office denied all wrongdoing.
Olmert's troubles could come to a head next Monday, when a government commission investigating the troublesome Lebanon conflict presents its interim report.
Israeli newspapers have said the report will harshly criticize Olmert and his defense minister, Amir Peretz, for their handling of the conflict, which erupted after Hezbollah guerrillas crossed into Israel and killed three Israeli soldiers and captured two others.
Nearly 160 Israelis died in the fighting, and Israel failed to return the captured soldiers.