HIGHLIGHTS: Occupation Army Kills an Armed Palestinian in Gaza Strip||Palestinians, Israelis in War of Words over Bus Blast Earlier Sunday||Hamas & Qassam Brigades Claim Responsibility for Bus Bombing||Occupation Army Demolishes Nine Palestinian Homes|| STORY: Three people were killed when a Palestinian Resistance man opened fire near east Jerusalem's Old City.

The Palestinian armed with a pistol shot a car from the Israeli telephone company Bezek, then opened the door of the vehicle and fatally wounded a security guard sitting next to the driver.

Israeli border police posted at the Old City's Damascus Gate opened fire on the attacker, killing him.

A Palestinian passer-by was also killed in the exchange.

ARMED PALESTINIAN KILLED IN GAZA STRIP

An armed Palestinian was meanwhile killed on the northern coast of the Gaza Strip near the Dugit settlement.

The Palestinian, wearing a wetsuit, was spotted by an occupation army observation post as he left the sea and approached the security perimeter of the settlement.

He was armed with a Kalashnikov assault rifle and grenades.

Subsequently the Israeli occupation army launched an incursion into a Palestinian area near Dugit, destroying a holiday camp run by the Palestinian youth ministry and another building.

Some 50 tanks and other armoured vehicles took part in the raid.

PALESTINIANS, ISRELIS IN WAR OF WORDS OVER BUS BOMBING

Israeli and Palestinian officials traded blame over a bus bombing that killed at least eight and wounded 50 in northern Israel.
Israeli government spokesman Avi Pazner vowed the Jewish state would fight "without mercy" against the Palestinian Resistance men who blew up the bus, while a Palestinian official held Israeli Prime Minister Ariel Sharon responsible for the attack.

A senior advisor to Palestinian leader Yasser Arafat, Nabil Abu Rudeina, said that the hardline policies of Sharon were to blame for the blast.

"Ariel Sharon's government bears the responsibility for this violence because it continues its aggression against the Palestinian people and refuses to return to the negotiating table," Nabil Abu Rudeina told AFP.

"We demand that the United States stop backing the Israeli government so that it puts an end to its aggression. We demand that Israel withdraw from our cities and go back to the negotiating table, for it is the only way we will achieve security, peace and stability," he added.

HAMAS & QASSAM BRIGADES CLAIM RESPONSIBILITY FOR BUS BLAST

The blast which wrecked the bus near the town of Safad was claimed on behalf of the armed wing of the Palestinian Islamist group Hamas in an anonymous call to AFP.

The Ezzedine al-Qassam Brigades also claimed the attack in a statement read on al-Manar television, the satellite channel of Lebanese Shiite fundamentalists Hezbollah.

The Brigades said the attack, which it described as a "martyr operation, came in retaliation for the death of Salah Shehade, the group's military commander whom Israel killed in an air strike in Gaza City on July 22.

Hamas also carried out Wednesday's bombing at Hebrew University in Jerusalem that left five Americans and two Israelis dead. That attack was also to avenge Shehade.

ISRAELIS DYNAMITE NINE PALESTINIAN HOMES

The Israeli occupation army meanwhile blew up nine houses in the West Bank belonging to families of Palestinians who carried out anti-Israel attacks.

Witnesses said eight homes had been demolished belonging to families of members of Resistance groups, but the occupation army later said it had destroyed nine houses.

In Qabatiyeh, south of Jenin, the occupation army demolished the home of Mohammad Mahmoud Bakr Nasr, from the Jihad Resistance group who carried out a bombing in the northern Israeli town of Haifa on August 12, 2001 that left 15 wounded.

North of Jenin, in Silat al-Harasiyeh, the occupation army flattened the home of Abdel Karim Issa Khalil Tahayneh, a Jihad member who carried out a bomb attack that killed one other person on a bus in Afula in northern Israel March 5.

In Jenin, the occupation army razed the home of Hamzi Samoudi, also from Jihad, who carried out a bombing on a bus in Meggido on June 5 that killed 17.

The occupation army also dynamited the house of Ezzedine al-Masri, a Jihad member, who carried out a bombing at west Jerusalem's Sbarro pizzeria on August 9, 2001 that left 15 dead. His father and brothers were arrested.

In al-Yamoun, a village west of Jenin, the occupation army said it destroyed the home of Nimer Mohammed Yussef Abu Siffin, who carried out a bombing in Haifa last December 9 that left 20 wounded.

In the village of Taluza, north of Nablus, the army dynamited the house of the family of Mashour Hasaideh, a member of the Al Aqsa Martyrs' Brigades, an armed offshoot of Palestinian leader Yasser Arafat's Fatah movement. He carried out a bomb attack in west Jerusalem on March 21 in which three people died.

In the village of Tel, south of Nablus, the occupation army destroyed the house of the family of Assem Rihan, a member of the armed wing of Hamas, who died in a bomb attack on an Israeli bus near the West Bank settlement of Emmanuel on December 12 last year, in which eight Israelis were killed.

His father and three of his brothers were also arrested by the occupation army.

In Hebron, in the south of the West Bank, two other houses were blown up, one belonging to the family of a member of Hamas, Tareq Dufish, responsible for an attack on the Adora settlement in which four Israelis were killed on April 27.

The other house demolished belonged to Fahdi al-Duek, a suspected intifadha jailed by Israel.

PHOTO CAPTION

Workers sift through the remains of a bus bombed Sunday, Aug. 4, 2002, in Meron Junction, Israel. According to Israeli witnesses and officials an apparent suicide bomber blew up the bus in northern Israel during rush hour Sunday, killing at least 10 people, wounding dozens and scattering charred remains across the highway. (AP Photo/Eitan Hess-Ashkenaz