The sudden surge of violence left the U.S.-backed Mideast "road map" peace plan in tatters. In the week since the initiative was launched at a summit in Jordan, 24 Palestinians and 21 Israelis have been killed.
The violence continued early Thursday as Israeli helicopters fired missiles at a car in the Zeitoun neighborhood of Gaza City, witnesses said. Two people were killed, doctors said. They were identified as low-level Hamas members, ages 22 and 24, from a unit that guards city streets.
It was the second Israeli air strike in Gaza City in six hours. Two Hamas militants and five bystanders were killed in the first attack, which followed the suicide bombing in Jerusalem.
The Islamic militant group Hamas claimed responsibility for that attack, which occurred in one of the city's most heavily policed areas. The bombing reflected the breakdown of Palestinian efforts to bring Hamas to accept a truce with Israel.
In Chicago, President Bush made no effort to disguise his anger and sorrow at the bombing, reports CBS News Correspondent Mark Knoller. He urged all nations to cut off financial assistance to terrorists and "isolate those who hate so much that they are willing to kill."
Israeli Prime Minister Ariel Sharon said Israel will continue battling Palestinian militants, despite the deadly bombing in Jerusalem. He promised Israel will keep that fight up until "the end of the terrorists and those that send them."
Palestinian Prime Minister Mahmoud Abbas called for all sides "to immediately move into a serious implementation of the road map."
Yasser Arafat, the isolated Palestinian president, also called for a halt to the violence, going on Arab television and imploring both sides "to stop this deterioration and return to the negotiating table for the sake of the two peoples."
The flurry of violence fulfilled observers' worst predictions, after an attack by three Palestinian militant groups on an army base killed four Israeli soldiers Sunday, and Israel responded by unsuccessfully trying to kill a top Hamas leader in a missile attack Tuesday that killed two others. A second Israeli attack in Gaza Tuesday, responding to the source of rocket fire, killed three bystanders.
The bus bombing was carried out by a man dressed as a religious Jew. Palestinians identified the bomber as Abdel Madi Shabneh, an 18-year-old high school student from the West Bank town of Hebron. Israeli soldiers began searching his house after sundown.
The explosion, the most deadly bus bombing in three months, occurred near the Mahane Yehuda outdoor market, a heavily policed area repeatedly targeted by Palestinian militants in the past.
Police said 16 bystanders were killed and 70 wounded.
Natan Sharansky, Israel's minister for Jerusalem affairs, stood next to the bus ruins shaking his head.
"My daughter rides that bus, so immediately you start checking where your family is and getting irritated because one doesn't know where the other is and none of the phones work," he said.
A Hamas-linked Web site claimed responsibility for the attack on behalf of Hamas' military wing.
Less than an hour after the Jerusalem bombing, Israeli helicopter gunships fired two missiles at a small Fiat carrying two members of the Hamas military wing, Tito Massoud, 35, and Soheil Abu Nahel, 29, killing them instantly.
The car was stuck in a rush hour traffic jam and had driven onto the sidewalk in an attempt to get away, witnesses said. The missiles turned the car into a burning ball of wreckage. Hundreds rushed to the scene, trying to put out the fire with blankets and water.
Dr. Moawiya Hassanain, director of Shifa Hospital in Gaza City, said a total of seven people were killed and 30 wounded in the missile strike. Among the wounded were eight children under the age of 14.
Jamil Hamdia, 35, cried as he carried his wounded 11-year-old cousin in the hallway of Shifa Hospital. "Where is Abu Mazen to come and see?" wailed Hamdia, referring to Abbas by his nickname. "Are we cheap, to be killed like this?"
An Israeli official, speaking on condition of anonymity, said the rocket attack was not in retaliation for the bus bombing, but was a planned effort to take out Hamas militants.
The Israeli official said Massoud, 36, was in charge of producing and firing homemade rockets into Israel.
Palestinian security sources said Massoud was the commander of the Hamas military wing in northern Gaza and had served as a personal assistant to Hamas military leader Salah Shehadeh — who was killed by Israel last July — and masterminded several attacks against Israeli targets in Gaza and elsewhere.
The violence badly undermined the fragile position of Abbas, who has little political base of his own and took office April 30 as part of a plan to restart peace efforts.
Ehud Olmert, Israel's vice premier, said Hamas was trying to destroy peace efforts and demanded Abbas crack down immediately on militants. "It is clear that a significant diplomatic process cannot take place with violence," he said.
Hamas opposes the road map and last week announced it had broken off truce talks with Abbas.