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A bomb in the streets of central Jerusalem, the first in more than six years, has exploded in the city, killing one person and wounding 30 as they queued for a bus.

It was the culmination of a day of violence, one that began with rocket attacks, fired by Palestinian militants in the Gaza Strip, on the Biblical city of Beersheba and ended with rising expectation of war.

Following the attack, Benjamin Netanyahu, the Israeli prime minister, said that Israel would act "aggressively, responsibly and wisely" in wake of a recent upsurge in violence.

Even before the bomb, Mr Netanyahu had hinted he would respond to an upsurge in rocket fire from Gaza with a fresh military offensive on Gaza. By nightfall, MPs in his Likud party were predicting that Israel's attack could come "within days".

Minutes before 3pm, the ominous crump of an explosion echoed through Jerusalem. Shoppers on Jaffa Street, the city's principal thoroughfare, paused mid-stride and then began to run.

The sudden eruption of wailing sirens moments later confirmed what many in a city inured to violence had instinctively suspected immediately: the unofficial ceasefire in Jerusalem was over.

"It knocked me off my feet," said one man as he fled the scene, where scorch marks, blood stains and the shattered windows of a bus marked the spot where the bomb exploded. "It was horrific. Glass everywhere, blood everywhere, people lying wounded on the road."

The bomb, left in a small suitcase by a bus stop, killed a 60-year-old woman. At least two other victims were in critical condition, doctors said.

Mr Netanyahu, the Palestinian leadership in the West Bank and the United States all strongly condemned the attack. William Hague, the Foreign Secretary termed it "a callous and disgusting act of terrorism". President Barack Obama said: "There is never any possible justification for terrorism."

Until Wednesday, Israel had seemed like the only stable country in a region gripped by violent turmoil and many Israelis had become accustomed to a life free from terror.

Yet many knew too, with peace talks foundering, that the tranquility could easily prove ephemeral.

In the past week, Hamas, the Islamist overlords of Gaza, claimed credit for a barrage of mortar fire in an apparent attempt to redirect growing unrest from activists inspired by popular revolutions elsewhere in the Middle East.

Speaking before yesterday's bomb, Mr Netanyahu gave warning of that he was contemplating protracted military action – as opposed to occasional retaliatory strikes – for the first time since Israel's offensive against Gaza in December, 2008.

"No country would be prepared to absorb protracted missile fire on its cities and civilians," he said.

"It could be that this matter will entail exchanges of blows, and it may take a certain period of time, but we are very determined to strike at the terrorist elements and deny them the means of attacking our civilians."

The bombing in Jerusalem will only increase the pressure on Mr Netanyahu, who built his reputation as a hawk able to safeguard his civilians from attack.

From the Israeli right, which has scorned Mr Netanyahu for even the limited concessions he has made to the Palestinian leadership, there were calls for swift action.

"I think it is time that the prime minister and the defence minister will focus on fighting terrorism rather than trying to satisfy the wishful peace plan of President Obama," said Danny Danon, an influential MP in Mr Netanyahu's Likud party.

"The main action should be in Gaza and I believe we will see that action in the next few days."

It was unclear whether yesterday's bombing could be attributed to any group in Gaza.

There was no immediately claim of responsibility, but authorities blamed Palestinian militants and threatend harsh retaliation.

Boaz Ganor, a leading Israeli counter-terrorism expert, said the "primitive" nature of the attack, and the fact that it was not carried out by a suicide bomber as in the past, could suggest that it was carried out by individuals with no affiliation to any militant group.

"It could be that what we have here is a certain type of personal initiative attack," he said. "Either one person, or a few friends made a decision to carry out the attack."

Yet the mood at the scene of the attack, where hundreds of ultra-orthodox Jews chanting "death to the Arabs", cried out for retribution – not just for this attack, but also the stabbing of five members of an Israeli settler family, three of them young children, in the West Bank earlier this month.

"There will never be peace with the Arabs that call themselves Palestinians," said Ben Cohen, a visitor from New York who had flown to Israel to show his solidarity after the West Bank attack.

"They are Islamic terrorists and fundamentalists who want to kill Jews and Christians. They are taking over Israel, the English and French parliaments and soon the whole world."
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