Updated

Islamic Jihad's top military commander in Gaza was killed Wednesday in a car blast that rocked a busy street in Gaza City, knocking out electricity and wounding two other people.

The Israeli military, which carries out pinpointed attacks against militants in the coastal strip, said it was not involved in the death of rocketmaker Khaled Dahdouh. And the Palestinian Interior Ministry said no missile parts were found in the incinerated car.

But Islamic Jihad accused Israel of killing Dahdouh in an airstrike and vowed revenge for his death.

Islamic Jihad — unlike the militant Hamas group that swept Jan. 25 Palestinian elections — has been the target of recent Israeli attacks on militants. The group has disregarded a year-old informal truce with Israel and carried out all six suicide bombings that have taken place in that time.

Violence also spilled into the West Bank, where Palestinian militants shot and killed a Jewish settler traveling on a road Wednesday near the settlement of Tapuah, military officials said.

The Al Aqsa Martrys' Brigades, a group affiliated with Palestinian leader Mahmoud Abbas' Fatah Party, took responsibility for the shooting. Israeli troops were searching for two gunmen who fled the scene, Israel Radio said.

A second shooting just miles away left an Israeli man seriously wounded, the Israeli military said. The man was shot in the neck in a drive-by shooting near the settlement of Karnei Shomron, it added. Nobody claimed responsibility.

The violence came as Hamas prepared to take over the Palestinian Cabinet and Israel heads into March 28 parliamentary elections.

Islamic Jihad has rejected Hamas' offer to join a Palestinian government. Hamas, which has killed hundreds of Israelis, has largely stuck to the truce, though it has not renounced its violent campaign against Israel.

A Palestinian Interior Ministry report said it was unclear whether the car was parked or traveling over a speed bump when it exploded. It said no missile parts were found in the car, but offered no explanation for the blast.

A witness, Ahmed Abdel Khalouk, said he was sitting about 100 yards from Dahdouh's car, which was parked at a speed bump, when he saw a large man walk over to it and open the driver's door.

"There was a huge ball of fire, and debris from the car covered the entire area," he said. "I think the car was booby-trapped."

Islamic Jihad said Israel killed Dahdouh in a missile attack after failing to kill him nine times before.

"The Zionists will swallow the same bitter drink that each Palestinian family has drunk from before," group spokesman Abu Dajana said.

Dahdouh, 45, was behind the development and manufacture of a new generation of longer-range homemade rockets that militants have fired recently at southern Israel, Islamic Jihad said. He also planned and participated in several attacks against Israeli targets in Gaza and the West Bank, it said.

The blast took place in the residential area between Islamic University and the Finance Ministry compound in Gaza City. It knocked out electricity in the area and damaged several cars parked nearby. Hospital officials said two people were wounded.

Samira Daoud, 32, was standing on the balcony waiting for her children's schoolbus to arrive when the blast occurred.

"The explosion shattered all the windows of my apartment and some of the flying shrapnel from the windows hit me in the face," Daoud said, her face splattered with blood. "I ran to the street to see if my children were there, and I saw a man lying outside of the car with a big white beard, and he was bleeding."

Israeli Foreign Minister Tzipi Livni, meanwhile, warned European leaders of the danger of funding a Hamas-led government, saying there was no guarantee that Hamas wouldn't use aid money to harm Israel.

"Nobody wants to give money to a terrorist organization," Livni said in Vienna, Austria, on a first stop of a European tour.

The European Union announced Monday it will provide $143 million in emergency assistance to the caretaker Palestinian government aimed at preventing its financial collapse, but has so far kept silent on what it would do once Hamas — considered a terrorist organization by the EU and the U.S. — takes office.

In other violence, three masked gunmen kidnapped the director-general of the Palestinian Lands Authority in Gaza, witnesses said.

Palestinian farmers in Gaza also canceled plans to destroy 200 tons of produce that they have been unable to export since an Israeli-controlled crossing was closed Feb. 21, because they expect Israel to reopen the passage on Thursday, Palestinian border officials said.

The Israeli army did not immediately confirm that the Karni crossing — the main cargo passage between Israel and Gaza — would be opened on Thursday.