Hamas gunmen riddled a Fatah police jeep with gunfire at close range Tuesday, killing eight policemen in the most ruthless round yet of factional fighting, pushing the fragile Palestinian unity government closer to collapse.

Gunmen in black ski masks controlled the streets and terrified residents huddled in their homes. Israel, too, was briefly drawn into the battle.

"I don't know when it's going to end and what the future will bring," said Salman Abu Arafeh, 42, a Gaza City interior decorator who was pinned down by gunfire in the hallway of his apartment for several hours early Tuesday, along with his wife and two young children.

In the West Bank, Abbas called for the immediate implementation of a security plan that would put all rival forces under one command. However, his call is unlikely to be heeded: the fighting made it clear that the Hamas-Fatah power struggle was never really resolved, despite the formation of the unity government in March.

Gaza's turmoil further weakened hopes for a resumption of Israeli-Palestinian peace talks, despite a new push by the Arab world to bring the sides to the table, based on an offer of Arab recognition of Israel in exchange for an Israeli withdrawal from all lands it occupied in the 1967 Mideast War.

Israel has expressed major reservations, but Israeli Prime Minister Ehud Olmert told Jordan's King Abdullah in a meeting in Jordan on Tuesday that he's ready to meet with Arab leaders in Israel or anywhere else to talk about the idea. Abdullah, in turn, asked Olmert to set a timetable for reaching a peace deal.

Negotiations, however, are inconceivable if the Palestinians descend into a protracted civil war.

This week's fighting was the worst since Hamas and Fatah agreed in February to share power. In all, 21 people have been killed and dozens wounded in three days of street fighting — including13 dead on Tuesday.

Early Tuesday, in the deadliest battle of this round, Hamas gunmen fired rockets, rocket-propelled grenades and mortars at a training base for Fatah forces guarding the Karni cargo crossing with Israel, Gaza's lifeline. U.S. security experts had helped set up the base to improve security at Karni.

After the initial attack, Hamas fired on Fatah reinforcements rushing to the scene, and one of the jeeps carrying Fatah fighters veered off the road and crashed. Hamas gunmen surrounded the vehicle and riddled it with gunfire, said one witness, who works in a nearby factory. "It was unbelievable. May God help us," said the man, who gave only his first name, Jamil, out of fear for his safety.

Eight men were killed, hospital officials said. Fatah security men came under fire as they tried to move the bodies lying near the overturned jeep.

Two Israeli helicopter gunships and three tanks moved toward the area, and Hamas fighters quickly withdrew. At one point, a major in the Palestinian Presidential Guard was killed by Israeli army fire as he tried to leave the Karni crossing through an exit near the Israeli border, security officials said.

Before sundown, Hamas said it fired five rockets at Sderot, an Israeli town near Gaza in retaliation for the Israeli attack. One rocket hit a house, seriously wounding an Israeli. It was the first time in three weeks that Hamas has claimed responsibility for a rocket barrage.

Israeli military officials said Israel has no intention of letting itself be drawn into the fighting.

However, Israel closed Karni, the only route for cargo into Gaza. The closure means Gaza will soon run out of fuel for its power plant and electricity to most of the strip could be shut down by Wednesday morning, said Abdel Karim Abdeen, head of the Palestinian Energy Authority.

The current round of fighting had many of the elements of previous Hamas-Fatah clashes: combatants kidnapped scores of rivals, set up roadblocks to search cars, took over rooftops of high-rises and often fired randomly in crowded residential areas.

Around Abbas' seaside compound in Gaza City, security forces loyal to the president searched cars, asking drivers to open trunks and inspecting ID cards of motorists. They gave those with beards — a possible sign of Hamas support — an extra close look.

However, both sides have also become more ruthless this time, with Fatah accused of an execution-style killing of two Hamas supporters Sunday and Hamas ambushing the Fatah jeep Tuesday. This might make it increasingly difficult to negotiate a cease-fire and revive the coalition.

At the core of the fighting is the unresolved power struggle between Hamas, which won parliament elections last year, and Abbas' Fatah, which dominated Palestinian politics for four decades. After a year in power and squeezed by an international aid boycott, Hamas realized it cannot govern alone and brought Fatah into the government. But the two sides never worked out all their differences, particularly control over security.

While the power-sharing deal largely halted factional fighting for three months, both sides continued to smuggle weapons through tunnels under the Egypt-Gaza border, preparing for the next round.

The spark for the new round was the deployment of 3,000 Fatah-allied members of the security forces in Gaza City last week, over Hamas' objections. Hamas has also bristled at Abbas' appointment of former Gaza strongman Mohammed Dahlan, a politician hated by many in Hamas, as his national security adviser.

"Palestinian society is now similar to Lebanese society — always in civil war or on the verge of civil war," said analyst Hillel Frisch of Israel's Bar-Ilan University.

"It's going to be cyclical: both sides know the tremendous costs, so they try to contain it, but the problem is simply left unresolved, and is probably unresolvable," he said.

Both sides accused each other of waging a carefully orchestrated campaign to destroy the other.

The National Security, a force loyal to Abbas, said Hamas is leading a military coup against the Palestinian security establishment. A Hamas spokesman, Abdel Latif Kanuah, said Fatah is involved in a U.S.-backed plot to overthrow Hamas, referring to U.S.-backing for Abbas' elite forces, the Presidential Guards.

Despite the unity government's shortcomings — it also failed to end the international embargo that was imposed on Hamas — it's unlikely Abbas will dissolve it and call early elections. Hamas would consider that an attempt to steal its election victory, and likely oppose it violently.

• Visit FOXNews.com's Mideast Center for more in-depth coverage.

Complete coverage is available in FOXNews.com's Mideast Center.