HIGHLIGHTS: Palestinians Arrest 16 Hamas Members||International Concern that Israel's Gaza Offensive Could Lead to More Bloodshed||Fighting in Densely Populated Gaza More Complicated & Could Expose Occupation Troops for Deadly Resistance Attacks||STORY: Tanks were poised outside the Gaza Strip and Israel called up military reservists Thursday ahead of an expected retaliatory attack for Palestinian Resistance bombings. (Read photo caption)

Palestinians arrested 16 members of Hamas, the Islamic militant group that claimed it carried out a deadly attack earlier this week, a first sign that Yasser Arafat was taking action against what Israel and the United States call 'terror groups.'

Tanks were parked off Gaza, the home base of the Hamas militant group, and Israeli forces around the strip were being beefed up Thursday night.

HAMAS GOES ABOUT BUSINESS AS USUAL

But Hamas leaders in Gaza - a sliver of Mediterranean coastline two-thirds of which is under Palestinian autonomy - said they were going about life as usual.

Hamas founder Sheik Ahmed Yassin went ahead with the afternoon wedding reception for one of his seven daughters, his son Mohammed said. A Yassin deputy, university lecturer Mahmoud Zahar, said he was staying at home to prepare exams and a Hamas spokesman, Abdel Aziz Rantisi, said his schedule was filled with TV interviews.

Mohammed Dahlan, Yasser Arafat's security chief in Gaza, said the Palestinians were expecting an attack.

On Thursday, the Israeli Cabinet approved unspecified reprisals in response to Tuesday's bombing in a pool hall in a Tel Aviv suburb. Fifteen Israelis were killed in the attack, the deadliest since Israel launched its West Bank military offensive March 29 .

The reserve call-up was smaller than the one that preceded that operation, during which troops occupied six of the eight main Palestinian towns in the West Bank for periods of up to several weeks and fought running battles with Palestinian Resistance men.

Foreign Minister Shimon Peres hinted Israel might have a more limited operation in mind this time, "striking at centers from which the attackers come, or the houses from which they come, or the nests from which the organization of the bombers comes."

Military sources said the operation will be centered on Gaza, but may not be restricted to the strip. The objective is to hit at Hamas leaders and end the sense of immunity the militants in Gaza have enjoyed.

Military commentators also said they expected the Gaza operation to be more limited than the West Bank offensive. Fighting in densely populated Gaza would be much more complicated and could expose troops to greater risks.

CONCERN PLANNED GAZA OFFIENSIVE COULD LEAD TO MORE VIOLENCE

European Union envoy Miguel Moratinos condemned the latest Palestinian bombing attack, but said the EU was "very concerned" it could lead to increasing violence and a new military action. The EU was working with the United States, Russia and the United Nations to try to prevent that, he said.

Palestinian Cabinet minister Saeb Erekat criticized the expected operation.

President Bush's spokesman reacted cautiously, saying the key test will be whether those arrested remain in custody.

"We're looking into the reports of the arrests," White House spokesman Ari Fleischer said.

PHOTO CAPTION

Israeli occupation soldiers and Merkava tanks are shown near the Gaza strip, Thursday May 9, 2002. The Israeli occupation army has begun calling up reservists in apparent preparation for a possible strike against the Gaza Strip. (AP Photo/Gadi