Updated

Israeli troops killed a local Islamic Jihad (search) leader in a firefight Thursday after the army said he resisted arrest, prompting threats of revenge by the militant group and placing further strain on an already shaky cease-fire.

The military confirmed that soldiers raided the hideout of the local leader, Mohammed Sidr, saying troops came to arrest him for allegedly planning to attack Israelis with a car bomb.

The army said that when troops called on Sidr to give himself up he fired at them and the two sides traded shots for about six hours. Witnesses said the soldiers then fired an anti-tank missile into the building, setting it ablaze and bringing down walls. Military bulldozers then demolished the ruins.

The army said it could not confirm Sidr's death, but witnesses saw a body retrieved from the rubble.

Sheikh Bassam Sadi (search), leader of Islamic Jihad in the West Bank (search) confirmed Sidr's death and promised revenge. "I assure our people that this crime in Hebron will not go unpunished," he said.

The killing of two members of the radical Islamic Hamas (search) group under similar circumstances last week led to a revenge attack on Tuesday in which a teenage Hamas homicide bomber killed a Jewish settler.

Israeli Defense Minister Shaul Mofaz said he suspects that Palestinian leader Yasser Arafat was involved in that attack and another homicide bombing on the same day, though Arafat insists he doesn't support attacks on civilians.

Prime Minister Ariel Sharon and Mofaz have renewed their criticism of Arafat since Tuesday's bombings, which killed two Israelis and wounded 11, saying he is trying to undermine Palestinian Prime Minister Mahmoud Abbas. Abbas was appointed in April under heavy U.S. and Israeli pressure to find an alternative to Arafat.

"I wouldn't be surprised if Arafat is behind the recent terror attacks," Mofaz said during a visit to northern Israel on Wednesday.

"Arafat continues to be an obstacle to this (peace) process. I am convinced that we need to reconsider the question of Arafat and what steps should be taken," he added.

Mofaz has been one of the most outspoken proponents of expelling Arafat, a step frequently debated by Israel's Cabinet but opposed by Israel's security services and in the end vetoed by Sharon. Those opposing expulsion say it would only boost the stature of Arafat, who has been confined to the West Bank town of Ramallah for nearly two years.

Palestinian legislator Saeb Erekat called Mofaz's comments "ridiculous and nonsensical."

"It's part of a series of accusations that aim at shifting the eyes of the world from the fact that the Israeli government is continuing to sabotage the vision of President Bush and the road map," Erekat said, referring to a U.S.-backed peace plan.

Israelis and Palestinians have traded charges of blame since Tuesday's bombings, each accusing the other of not meeting their commitments under the "road map" peace plan.

Tuesday's bombings, one claimed by Hamas and the other by renegades from Arafat's Fatah movement, were the most serious violations yet of a cease-fire declared by Palestinian militant groups June 29. A high-ranking delegation from Egypt was expected to meet with Islamic militants in the Gaza Strip this week to try to persuade them to maintain the truce.

Early Thursday, Israeli troops in the West Bank city of Nablus destroyed the family home of the Hamas bomber and arrested an alleged militant in the neighboring Askar refugee camp. The Askar home of the other homicide bomber was destroyed a day earlier.

The Palestinian leadership condemned the homicide bombings, but Sharon demanded that the Palestinians do more, saying they must arrest and punish the planners of terror attacks, ban militant groups and confiscate their weapons.

The road map, which leads through three stages to a Palestinian state by 2005, requires Palestinians to dismantle violent groups. Israel says the Palestinians must begin immediately to disarm the groups, and that it will freeze any further steps until they do.

In an interview published Wednesday in the French daily Le Figaro, Sharon urged Abbas to block Arafat's continued influence over the security forces.

"He (Abbas) needs to take control of the money and the payment of salaries," Sharon said.

The Al Aqsa Martyrs' Brigades, a militant group with ties to Arafat's Fatah movement, has carried out scores of shooting attacks and a few bombings in the past three years. Fatah signed on to the June 29 cease-fire, but Al Aqsa renegades, including those funded by Iran, have said they will not observe it.

Arafat himself was in mourning on Wednesday following the death the day before in a Cairo hospital of a sister, Yousra Abdel Raouf Al Kidwah, at age 77.

Arafat did not plan to attend Thursday's funeral in the Gaza Strip, said an aide, Ahmed Abdel Rahman. Arafat would have to request Israel's permission to leave Ramallah, and Israeli officials said no such request had been received.