Israeli soldiers killed six Palestinians on Saturday in the occupied West Bank and the Gaza Strip in the bloodiest violent outbreak in months.

Three of those killed belonged to a militant group within the Western-backed Palestinian President Mahmoud Abbas's Fatah movement Israel accused of perpetrating a roadside shooting that killed a Jewish settler two days earlier.

An official in Abbas's government accused Israel of a "grave escalation." A militant leader threatened revenge, charging Israel would now "open the gates of hell."

Israeli armored vehicles entered the West Bank city of Nablus before dawn, when soldiers surrounded homes where members of the al-Aqsa Martyrs Brigades, a militant group of Abbas's Fatah group, were inside.

The troops shot dead three militants suspected of killing the settler who ignored orders to surrender, spokesman Major Peter Lerner said.

The militants had not shot at the troops but soldiers had acted assuming each was "armed and dangerous," Lerner said.

One of the dead was found holding a gun and the wife of another had been wounded in the leg.

In Gaza, soldiers shot and killed three Palestinians near a border fence they suspected of trying to infiltrate from the Hamas-ruled territory. A Hamas security source said the three were shot as they collected scrap metal.

The violent upsurge threatened to derail Western-backed security cooperation forged between Abbas's police force and Israel, and potentially tip a Palestinian power struggle against his Fatah movement, in Islamist Hamas's favor.

It also pointed up the risks of stalled U.S.-backed peace talks, frozen since a three-week Gaza war whose first year anniversary falls on Monday, December 27 and in which 1,400 Palestinians and 13 Israelis were killed.

'BLOOD AND FIRE'

Some Palestinians protested that Israel had not asked Abbas's forces to arrest the militants. Lerner said the militants had violated pledges to refrain from violence.

More than 10,000 Palestinians attended funerals for the militants in Nablus where businesses closed their doors answering calls for a general strike.

Abu Mahmoud, a spokesman for the militants, urged a response of "blood and fire" against Israel saying its "crime will not go unpunished," and would "open the gates of hell."

Palestinian Prime Minister Salam Fayad accused Israel of having staged an "assassination" that could torpedo already stalled efforts to resume peace negotiations.

"This is a sad day for Palestinians," Fayyad added, also voicing a hope "we would not be dragged into a circle of violence, chaos and instability."

Nabil Abu Rdainah, an aide to Abbas, told Reuters: "This grave Israeli escalation shows Israel is not interested in peace and is trying to explode the situation."

The settler, a father of seven, was the first Israeli killed in a Palestinian attack in eight months.

The death toll in Saturday's incidents was the highest of any Israeli-Palestinian confrontation in West Bank land since before the Gaza offensive, and the worst fatalities along the Gaza border since March.

(Reporting by Nidal al-Mughrabi in Gaza, Abed Qusini in Nablus, Mohammed Assadi and Ali Sawafta in Ramallah; Writing by Allyn Fisher-Ilan; Editing by Angus MacSwan)