Hezbollah, a Shiite militant group denied it had rocketed Haifa, where no injuries were reported, though two days of violence elsewhere left at least 57 people dead on both sides of the border. The crisis began with a Hezbollah raid on Israel that resulted in the capture of two Israeli soldiers.
The Israeli ambassador to the United States, Daniel Ayalon, called the attack on Haifa "a major, major escalation." The city, 30 miles south of the border, is home to 270,000 residents and a major oil refinery.
"Those who fire into such a densely populated area will pay a heavy price," said David Baker, an official in the Israeli prime minister's office.
Hezbollah's deputy leader Sheik Naim Kassem denied that the group had fired on Haifa, telling Al-Jazeera by telephone that the group would do so if Beirut or its southern suburbs were attacked.
Israeli warplanes struck the highway linking Beirut to the Syrian capital of Damascus early Friday, but the main artery remains open, Lebanese security officials said.
Fighter jets attacked a highway section in the mountains of central Lebanon, in Mdeirej. But the targeted area was an old road extension, and the bridge on the nearby main highway remains intact, the officials said.
The highway, which connects Beirut to Syria, is one of Lebanon's only links with the outside world since Israeli forces imposed a sea, air and land blockade of Lebanon on Thursday.
Late Thursday, helicopter gunships fired missiles on Beirut's airport, setting fuel tanks ablaze, Lebanese security officials said. TV footage showed flames shooting up from the airport.
Warplanes earlier punched holes in the runways and at two military air bases.
Israel's army chief Brig. Gen. Dan Halutz warned that "nothing is safe" in Lebanon and said Beirut itself — particularly Hezbollah offices and residences — would be a target. Maj. Gen. Udi Adam said Israel had hit hundreds of targets and hadn't ruled out sending in ground troops.
By bombing the Beirut airport and imposing a naval blockade, Israel is trying to stop the flow of supplies to Hezbollah, reports .
Lebanese officials say about four dozen people have been killed in air strikes across the country. One Israeli woman was killed Thursday in a rocket attack.
"I don't think Israel really overplayed its hand," says CBS News Middle East consultant Fouad Ajami. "I think it was a crisis that (Israeli) Prime Minister Olmert had to respond to and he's doing his best to control the terms of it."
The Israeli army said Hezbollah fired more than 100 rockets into northern Israeli towns, killing a middle-age man and a woman and wounding more than 35 civilians. Hezbollah said it was using a new missile that appeared to be more advanced than previous models.
A total of half a million Israelis were within range of the barrage. One rocket even hit the headquarters of the Israeli army's northern command.
Hotels in northern Israel sent guests packing Thursday, hospitals moved patients to their basements and canceled elective surgeries, schools shut down and authorities warned residents of Israel's third-largest city, Haifa, to stay near bomb shelters during the heaviest rocket barrage of northern Israel in decades.
In Lebanon, two days of Israeli bombings, the heaviest air campaign against its neighbor in 24 years, had killed 47 Lebanese and wounded 103, Health Minister Mohammed Jawad Khalife said. Eight Israeli soldiers have been killed.
Both sides played a high stakes game following the capture of the two soldiers by Hezbollah: Israel sought to end Hezbollah's presence on the border, while the guerrillas insisted on trading the captured soldiers for Arab prisoners.
Sandwiched between the two sides was Lebanon, which Israel said it held responsible for Hezbollah's actions. Hezbollah fighters operate with almost total autonomy in southern Lebanon, and the government has no control over their actions. But Lebanon has long resisted international pressure to disarm the group.
The timing isn't so good for the Lebanese people, who were looking forward to the height of tourist season.
"There is a contradiction, if you will, between the desires of the Lebanese people for normalcy and the desires of the Iranians," Ajami said.
"The Lebanese government must send the Lebanese army to its border with Israel. It must be responsible for its own border and responsible for its own policy," said Ajami, a Palestinian-American. "Hezbollah has to be disarmed. That's really the heart of this crisis. ... You cannot have a sovereign government and a vastly armed militia side by side."