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GAZA (Reuters) - Israel killed two Palestinians in air strikes and Hamas fired its first cross-border rocket barrages in more than a year as fighting along the Israel-Gaza frontier flared on Tuesday for a second day.
The confrontation, which appeared to die down after nightfall, initially matched a familiar pattern of Israeli strikes against small squads of Palestinian militants and rockets launched toward southern Israel near the border.
But the surprise decision by the Gaza Strip's rulers, the Islamist group Hamas, to re-engage militarily with Israel after months of staying on the sidelines and discouraging smaller groups from firing rockets held the prospect of wider conflict.
Since Monday, Israeli air strikes have killed six Palestinians, including four militants. A two-year-old Gazan girl died and her brother were wounded when militants launched a rocket close by, witnesses said. An Israeli military spokesman said there had been no air strikes in the area at the time.
A Hamas medical official said the cause of the children's injuries was not clear.
Hamas spokesman Fawzi Barhoum said Israeli attacks had prompted the group to "take a firm stance" and launch rockets. Israeli security officials said at least 40 rockets were fired at farms and towns in Israel on Tuesday, wounding two people.
A Palestinian source said the sides agreed to cease fire at 11 p.m. (2000 GMT) at the behest of Egypt, which has mediated between the foes in the past. Israel had no immediate comment.
Although other militant groups have launched rockets across the border, Hamas had held its fire under unofficial truces with Israel, a policy widely seen in Israel as effectively enabling the group to train and arm without much risk of Israeli attack.
Israel has said that Hamas, which seized the Gaza Strip from forces loyal to Western-backed Palestinian President Mahmoud Abbas in 2007, bears overall responsibility for any attacks from the coastal enclave.
"The more things deteriorate, the closer we come to a decision we don't want to make," Israeli cabinet minister Silvan Shalom said earlier on Tuesday. "The prospect of a ground operation (in the Gaza Strip) shouldn't frighten us."
"If this situation escalates, and I hope it won't, then all options are open. They know it. We know it. The international community knows it," he told Israel Radio.
On Monday, before the Gaza flare-up, militants who crossed into Israel from Egypt's Sinai desert fired on Israelis building a barrier on that frontier, killing one worker. Soldiers shot dead two of the infiltrators.
The Sinai attack, launched soon after the Muslim Brotherhood declared victory in Egypt's presidential election, increased Israeli concerns about lawlessness in the area since the fall of president Hosni Mubarak last year.
In a video recording obtained by Reuters in Gaza, a group of masked men claimed responsibility for the Sinai incident on behalf of what they said was a newly formed Islamic movement, the "Shura Council of Mujahideen in the Holy Land".
The masked men used Islamic slogans, pledging to liberate the Holy Land from what they termed Jewish control.
A second video showed two men, one of whom said they were about to embark on a mission to attack "the Zionist forces on the border of Egypt and occupied Palestine", an apparent reference to Monday's incident on the Sinai border.
The first man said he was an Egyptian named Abu Salah al-Masri. The other said he came from Saudi Arabia and gave his name as Abu Huthiyfa al-Rathali. The videos could not immediately be verified.
Writing by Jeffrey Heller; Editing by Kevin Liffey