An Israeli helicopter fired a missile at the home of an Islamic Jihad (search) leader in the southern Gaza strip early Saturday, lightly wounding two bystanders, residents said.

Meanwhile, Palestinian leader Yasser Arafat (search) urged his people Saturday to "terrorize your enemy," as he bitterly marked the 56-year anniversary of the establishment of Israel.

The target of the attack was Mohammed Sheik Khalil (search), a leader of the group's military wing, the witnesses said. He was not home at the time.

The army said Islamic Jihad had used the targeted building as a bomb-making facility and center for planning attacks against Israel.

The attack took place in the southern Gaza town of Rafah, where Israeli troops have been operating in recent days after five soldiers were killed in an attack on their armored personnel vehicle. Islamic Jihad claimed responsibility for that attack.

Earlier Saturday, Israeli troops withdrew from the nearby Rafah refugee camp after recovering the remains of the five soldiers, leaving behind at least 100 demolished homes.

Arafat's speech, broadcast live on Palestinian television, repeatedly called for his people to be steadfast in their struggle against Israeli occupation.

He ended the speech with a quote from the Koran. "Find what strength you have to terrorize your enemy and the enemy of God," he said.

The phrase in the Koran refers to Muslims' wars against pagans. It is followed by a phrase saying, "if they want peace, then let's have peace."