Israeli and Palestinian security chiefs held talks on Wednesday to discuss ways of staunching 17 months of bloodshed as a new Saudi peace initiative gained momentum with US and European interest.
But the latest moves to calm the Middle East conflict, including an offer by Israeli Prime Minister Ariel Sharon for a face-to-face meeting with Saudi officials, were marred by fresh violence.
Israeli troops shot dead a 25-year-old Palestinian overnight during an exchange of fire with gunmen at the Balata refugee camp near the West Bank city of Nablus, Palestinian security sources said.
Several hours later, a Palestinian man shot dead an Israeli at a factory on the outskirts of north Jerusalem and fled the scene, Israeli police said. The motive behind the attack was not immediately known.
Diplomatic sources said the resumption of US-mediated security talks was a positive sign the two sides were looking for ways to achieve a lasting ceasefire.
But Israel's Army Radio said no progress was made during the meeting, which started on Tuesday night and lasted into the early hours of Wednesday.
A previous session had been called off earlier this week due to Palestinian anger over an Israeli decision to keep Palestinian President Yasser Arafat confined to the West Bank city of Ramallah.
An Israeli political source said Israeli officials wanted Palestinian security officials to crack down on a militant group tied to Arafat's Fatah faction that has claimed responsibility for a recent spate of attacks on Israelis.
Numerous international efforts to broker a truce have so far failed to quell the fighting in which more than 1,100 people have been killed since a Palestinian uprising against Israeli occupation erupted in September 2000.
But a surprise peace initiative by Saudi Crown Prince Abdullah picked up speed on Tuesday with praise from U.S. President George W. Bush for its vision of Israeli-Arab normalisation.
European Union foreign policy chief Javier Solana cut short a visit to Israel and the Palestinian territories and planned to go to Saudi Arabia on Wednesday to discuss the proposal.
The initiative calls for Israel to withdraw from lands it occupied in the 1967 Middle East war in return for Arab recognition of the Jewish state.
Bureau Report