Israel pummeled Gaza on Thursday with air and ground fire, killing a militant leader and a woman relative, as barrages of rockets slammed into southern Israel, the third day of a suddenly intensified conflict that has endangered recently restarted peace negotiations.

Israeli Prime Minister Ehud Olmert warned that Israel won't stand for the relentless salvos and vowed to strike at Palestinian militants "without compromise, without concessions and without mercy." His forces carried out stepped-up attacks, but Olmert gave no hint that a large-scale offensive was near.

Gaza militants, led by Hamas, fired dozens of rockets and mortars at Israeli towns, causing no serious injuries but further traumatizing the battered residents, who have been putting up with daily barrages for many months. One rocket slammed into the side of a house, slightly wounding two people, police said.

Israeli struck back at northern Gaza, targeting rocket squads and areas militants frequently use. A leader of the small Hamas-allied Popular Resistance Committees, Raad Abu al-Ful, and a relative were killed when a missile hit their white sedan, the faction said. Earlier, Palestinian officials said the relative was al-Ful's wife.

The PRC pledged retaliation. "Sooner or later, [we] will, by God, avenge every drop of blood shed, and the response will be equal to the crime," the group said in a statement.

After nightfall Israeli aircraft targeted a car in northern Gaza, killing three — a woman and her son on a donkey cart next to the vehicle and and an unidentified man, Palestinian hospital officials said. The Israeli military said the airstrike was aimed at a rocket squad.

Direct Hamas involvement in the rocket attacks is a new development this week. Since June, when the Islamic militants overran Gaza, they have been content to allow other groups to freely fire rockets at Israel. That changed on Tuesday, when Israel sent special forces in to Gaza, setting off a daylong battle, the biggest in months.

Twenty-seven Palestinians, including a son of Gaza's Hamas strongman, Mahmoud Zahar, have been killed since the violence escalated Tuesday. Most were militants. Hamas and other groups have fired more than 150 rockets and mortars since Tuesday, according to the Israeli military.

On Thursday, Olmert acknowledged there was "no magic formula" to stop the salvos, but warned Israel would not stand for the relentless rocket fire.

"We will continue to fight the [Islamic] Jihad, Hamas and all their allies without compromise, without concessions and without mercy," he told a business conference in Tel Aviv.

Israeli Defense Minister Ehud Barak also talked tough, pledging to "continue until the rocket fire stops, and if necessary, we will intensify operations."

Barak was speaking after conferring with his commanders in the Gaza region. Earlier he met with senior brass in Tel Aviv and ruled out a large-scale ground operation in Gaza, at least for now, according to defense officials who spoke on condition of anonymity because the consultations were in private.

The widening violence has clouded Israeli-Palestinian peace talks, resumed after a Mideast conference in November sponsored by U.S. President George W. Bush. The spike in violence has drawn condemnations from moderate Palestinian President Mahmoud Abbas, Israel's partner in the peace negotiations.

On Thursday, Abbas spokesman Nabil Abu Rdeineh told The Associated Press that the violence is calling into question further talks. "No one can proceed with negotiations when the situation is like this," he said.

Israel's vaunted military has been baffled by the low-tech, homemade rockets with a range of only a few miles that have been plaguing Israel's south for years. Airstrikes and pinpoint ground operations have killed hundreds of Gaza militants, and full-blown invasions have caused widespread casualties and damage — but none of the measures have stopped the rocket fire for long. Israel is working on an elaborate system to shoot down the rockets, but it would not be deployed until 2012.

Militants have launched some 4,000 rockets and mortar rounds at southern Israel since Israel evacuated Gaza in the summer of 2005 after a 38-year occupation. The rockets have killed 12 people since 2001. Recently militants have been extending their reach as well, with one Iranian-made rocket flying 10 miles and hitting an Israeli city.