Israeli forces killed 17 Palestinians in an intense battle today, including the son of Mahmoud Zahar, the hardline leader of Hamas.

A Palestinian sniper also shot dead a volunteer from Ecuador who was working on a communal farm near the volatile coastal territory.

The latest clashes were the most intense since the recent visit by President Bush to push Israel and the Palestinians towards renewed peace talks, and threatened to undermine negotiations.

Mr Zahar is a hardliner blamed by many for the Islamic organisation’s armed takeover of Gaza last summer. His Hossam, 24, was a member of Hamas’s armed wing.

An Israeli Army spokesman said the raid by tanks, armoured bulldozers and helicopter gunships was designed to push Hamas and other militants away from the boundary fence separating Israel and the Gaza Strip, and to target Palestinian cells that launch daily barrages of rockets into the Jewish state.

The Palestinian sniper who killed Carlos Chavez, the 19-year kibbutz volunteer as he worked in the farm’s potato fields inside Israel, fired from just 100 yards away, just inside of the security fence, said Captain Benjamin Rutland.

“Thousands of Israeli workers are dependent for their livelihoods on fields that are adjacent to Gaza,” he said.

Mr Chavez was shot in the back as he was helping push a bogged-down tractor, and other farms workers evacuated him under fire from the Palestinian gunman.

“The bullets were screaming by our heads,” an Israeli farm supervisor said. “He lost a lot of blood and very quickly we understood that he wouldn’t come out of this.”

In Gaza City, Mr Zahar visited the main morgue where he cradled his son Hossam’s head in his hands and kissed him three times before reciting verses from the Koran over his body. His eldest son had been killed in an Israeli attempt on the Hamas leader’s life in 2003.

“What is going on in Gaza today is a shame for all of those who cooperated with Bush, the criminal, and with the Zionists,” Mr Zahar said. “I am talking about all kings, presidents and ministers,” he said, as Mr Bush continued his tour of the Gulf before heading to Egypt to meet President Hosni Mubarak.

“We are telling them, today they are killing our sons, tomorrow they are going to kill yours,” said Mr Zahar, who was the Palestinian foreign minister before Hamas fought a brief but bloody civil war with its secular rivals Fatah for control of Gaza.

Palestinian witnesses said the fighting started when Israeli troops targeted the Hamas units that operate close to the border fence as a first line of defence. As they fought them, more Hamas fighters rushed to the scene and the fighting spread into the area of Zeitouna, in eastern Gaza City. A total of 45 Palestinians were wounded in the battle, while one of the dead was a 65-year-old man.

“Shame, shame, for those who shake hands with the leaders of the occupation, those who sit with the occupation leaders, and those who give compromises to the occupation,” said Ismail Haniyah, the former Hamas prime minister as he went to donate blood.

Hamas’s initial response was to fire off more of its unguided Qassam rockets, one of which hit the southern Israeli city of Ashkelon without causing injuries. But in the small Israeli town of Sderot, close to the Gaza border, a rocket slightly wounded a seven-year-old girl and her mother, as well as several others who were treated for minor injuries.

The intensity of the violence seemed to have also shaken the Palestinian Authority in the West Bank, with whom Israel is negotiating the terms of a treaty to create an independent Palestinian state.

“What happened today is a massacre, a slaughter against the Palestinian people,” Mahmoud Abbas, the Palestinian president, said. “These massacres cannot bring peace.” His administration issued a statement calling Israel’s “ugly crimes a slap in the face” to international mediation efforts.

Ehud Olmert, the Israeli prime minister, has for the time being ruled out a massive Israeli invasion of the Gaza Strip, which would be costly for both sides and would not necessarily end the rocket fire that has plagued Israeli communities close to Gaza.

Another blow to the fragile peace process came in the form of 66 new residences being built in a Jewish settler community in occupied east Jerusalem. The community said it had all the necessary paperwork from the authorities to carry out the development, but the expansion of such controversial communities will undermine Palestinian trust in Israel’s commitment to freezing settlement activity.