The largest Israeli raid in the West Bank for months entered its second day with tens of thousands of Palestinians confined to their Nablus homes as soldiers searched the a crowded, poor section for suspected militants.

The military said soldiers uncovered the second explosives laboratory in the city in two days on Sunday, pledging to maintain the open-ended sweep through the overcrowded warren of paths and streets in Nablus until it fulfills its goal — nabbing the city's top militants and heading off attacks against Israelis.

Palestinian officials charged the offensive threatened efforts to restart peace negotiations.

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The raid began before 3 a.m. Sunday, when about 80 jeeps, armored vehicles and bulldozers poured into Nablus, witnesses said. Soldiers closed the main entrance to the city, known as a hotbed of militant activity, and the bulldozers erected huge piles of rubble to block off key roads, witnesses said.

It was first large-scale operation in the West Bank since Israeli forces entered Nablus last July 19 and surrounded a security compound to arrest suspected militants.

The military took over local television and radio stations, broadcasting orders to people to remain indoors and warning that the clampdown would remain in effect for several days, residents said. The army said the road closures and curfew were necessary to avoid civilian casualties.

Soldiers moved from door to door, entering homes in search of suspects, concentrating on the Old City, a section of rundown buildings and narrow alleyways.

Sporadic clashes were reported as soldiers were pelted with stones and cement blocks, and exchanged fire with Palestinian gunmen, the army said. Two soldiers and four Palestinians were wounded.

The raid came a day after Israeli troops discovered an explosives laboratory in the city, the West Bank's commercial center, and Maj. Avital Leibovich, an army spokeswoman, said the soldiers uncovered another explosive lab and small caches of weapons on Sunday.

Area commander Brig. Gen. Yair Golan said the military entered Nablus because of increased militant activity there. He said most of the intercepted bombers and explosives came from Nablus. "We entered the city to lower the threat level to Israel and hit terror infrastructure," he said in a telephone interview.

Palestinian officials said the raid threatened new peace efforts.

Abbas met last week with Israeli Prime Minister Ehud Olmert and U.S. Secretary of State Condoleezza Rice in Jerusalem. Though little progress was made at the meeting, participants said they discussed the possibility of extending a cease-fire in the Gaza Strip to the West Bank.

"We condemn this military incursion," said Saeb Erekat, a Palestinian lawmaker. "This will undermine the efforts that are being made to sustain the cease-fire with Israel."

The raid came at a sensitive time for the moderate Abbas, who is trying to put together a unity government with the radical Hamas group.

Hamas and Abbas' Fatah party reached a power-sharing deal earlier this month in Mecca, Saudi Arabia. Abbas said the deal forced the radical group to moderate its violently anti-Israel ideology and should pave the way for ending crushing international sanctions imposed on the current Hamas-led government.

Israel and Western donor nations have warned that they will not lift the sanctions if the new government does not agree to renounce violence and recognize Israel's right to exist.

Ghazi Hamad, spokesman for the Hamas-led government, said the Nablus raid was part of an Israeli effort to destroy the unity deal.

The sanctions have inflicted great hardship, and Palestinian officials said Sunday that their economy contracted 21 percent in the fourth quarter because of the boycott.

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