JERUSALEM: Squads of gunmen armed with heavy weapons and explosives crossed into Israel from Egypt's Sinai Peninsula on Thursday and attacked buses, cars and an army patrol, officials said. It was one of the boldest attacks on the Jewish state in years, killing seven Israelis and stoking concerns about Palestinian militants exploiting instability in Egypt.

The attacks began around midday and lasted for about three hours. Israeli security forces tracked down some of the assailants and killed seven in a gunbattle, military spokesman Lt Col Avital Leibovich said. Defence officials said three bodies were boobytrapped and Israeli TV channels said seven attackers were killed. There was no immediate word on whether any were captured alive or exactly how many in all were involved.

Israel almost immediately said the attackers came from the Hamas-ruled Gaza Strip and made their way through Sinai, which borders both Israel and Gaza. That raised the specter of an Israeli military reprisal against the Palestinian territory. Egypt and Hamas denied the allegations.

"The incident underscores the weak Egyptian hold on Sinai and the broadening of the activities of terrorists ," Israeli defence minister Ehud Barak said. "The real source of the terror is in Gaza and we will act against them with full force."

The attacks, which came close together in time and location , appeared coordinated . It was the deadliest assault in Israel since a Palestinian gunman entered a religious seminary in Jerusalem in March 2008 and killed eight people before he was shot dead himself. Security in Sinai has deteriorated sharply since February, when longtime leader Hosni Mubarak was ousted in a popular uprising . Many Israelis saw Mubarak as a source of stability with shared interests in containing Iran and its radical Islamic proxies in the region, such as Hamas. Mubarak also upheld the decades-old peace treaty with Israel.

Last week, Egypt moved thousands of troops into the Sinai peninsula as part of a major operation against al-Qaida inspired militants who have been increasingly active in Sinai since Mubarak's ouster in February.