Shaul Mofaz is running for leadership of the Likud party

It quoted Defence Minister Shaul Mofaz as having told Abbas that unless a crackdown on fighters begins by Sunday, Israel will re-designate two commercial terminals on the Gaza boundary as border crossings, which could choke off Palestinian trade.

There was no immediate comment on Friday's report from officials close to Mofaz, who is running for leadership of the right-wing Likud Party in advance of Israeli general elections in March.

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Chief Palestinian negotiator Saeb Erekat said he was unaware of such a threat being made, but said it would be inconsistent with a US-led road map to peaceful Palestinian statehood in the West Bank and Gaza, alongside Israel.

"This should not be acceptable to anyone," Erekat said.

Surge in violence

Israel left Gaza in September after 38 years of occupation, stirring peace hopes. But violence has surged intermittently.

After a Palestinian bomber killed five Israelis on Monday, Mofaz ordered a resumption of air strikes against fighters. Three leading Gaza fighters have since been killed.

Political sources said Israel has also suspended talks with the Palestinians on allowing bus convoys between Gaza and the West Bank, despite a deal brokered in November by US Secretary of State Condoleezza Rice.

Palestinians are now in control of the Rafah border crossing

That agreement led to the Palestinians taking control of the main Gaza-Egypt border crossing terminal at Rafah and also called for the bus convoys to start next week, followed by truck convoys in January, using a "safe passage" to the West Bank.

In addition to Rafah, Palestinians in Gaza have two commercial crossings into Israel - Karni and Erez. Though Israel has declared an end to its occupation of Gaza - a claim disputed by Palestinians - it has not formalised border crossings.

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