Mideast peace push hits turbulence

JERUSALEM (CNN) -- The U.S.-led push for an Israeli-Palestinian peace deal by year's end has hit turbulence as U.S. President George W. Bush winds down his eight-day Mideast trip.

Israel strengthened its military campaign against Gaza militants Wednesday while the withdrawal of a right-wing Israeli party further weakened the government of Prime Minister Ehud Olmert.

Military incidents Wednesday included a stray Israeli missile in Gaza City killing three people, Israeli troops shooting a senior Islamic Jihad leader and Palestinian militants firing rockets into a central Israeli town -- all 24 hours after Israeli operations caused several fatalities in Gaza City.

Avigdor Lieberman announced Wednesday he was pulling his Israel Beiteinu party out of Israel's coalition government because the new push to peace was taking the focus off more pressing issues, such as the perceived nuclear threat from Iran.

Despite the loss of 11 seats in the Knesset, the coalition government will keep its majority, with 67 of the 120-seat total. But Olmert -- who has sparse public support -- now has a reduced political platform.

Olmert's office issued a statement Wednesday saying he was "determined" to continue negotiations. "They contain the only real chance to assure the peace and security of Israel's citizens," it added.

Under pressure to stop ongoing attacks from Gaza, the Israeli military has clamped down on the Palestinian territory in recent days as it tries to push militants away from the Gaza-Israel border, renewing complaints from the Palestinian leadership baout heavy-handed treatment.

An Israeli airstrike in Gaza City Wednesday missed its target and struck a car carrying a Palestinian family, killing all three, Palestinian security and medical sources told CNN.

Israel Defense Forces spokeswoman Maj. Avital Leibovitch confirmed an Israeli missile struck the wrong car, stressing the IDF did not plan to harm innocent civilians and is investigating.

Leibovitch added that Palestinian militants in Gaza operate in populated areas and that civilians are sometimes unintentionally harmed.

Separately Wednesday Israeli troops killed Walid Obeidi, a senior leader with Islamic Jihad, an IDF spokesman said.

Soldiers were trying to arrest Obeidi in the northern West Bank when they returned gunfire, the spokesman said, killing him.

Obeidi, 46, led the military wing of Islamic Jihad in the West Bank. The IDF said he planned and executed several bombings in Israel, including an April 2006 suicide blast in Tel Aviv that killed 11 civilians and injured dozens.

Palestinian eyewitnesses said Israeli troops surrounded the house, in which Obeidi was hiding, at about 3 a.m. When he came out, heavy exchanges of gunfire followed and Obeidi was killed, they said.

Also Wednesday Palestinian militants fired about 20 Qassam rockets into and around the central Israeli town of Sderot, an Israeli army spokesman said. No injuries were immediately reported, said paramedics.

The incidents come a day after an Israeli military operation in and around Gaza City killed at least 17 Palestinians -- including civilians -- according to Palestinian security sources.

Palestinian President Mahmoud Abbas -- negotiating with the Israelis on the peace deal -- called that operation "a massacre" and blasted the Jewish state for its ongoing "aggression against our people."

The Israeli military said it was responding to daily rocket and mortar fire from Gaza militants on civilian targets inside Israel.

Also Tuesday, snipers stationed near the Gaza-Israel border killed an Ecuadorean kibbutz farmer as he tended his field. An IDF spokeswoman said such attacks are "the reason Israeli forces are operating in Gaza."

The violence overshadow the burgeoning peace process, which began this week as Palestinian and Israeli delegations started discussing core issues in their conflict, including Israeli settlements in the West Bank, the right of Palestinian refugees to return to Israel and Jerusalem as the shared capital of a future Palestinian state.

But Lieberman, head of the Ministry of Strategic Affairs, which co-ordinates policy toward Iran, said the peace issues being discussed threaten to divide the Jewish state. "The accelerated peace process is moving the weight from the subject which is in the center of the national consensus -- the Iranian issue -- to the Palestinian issue."

Last week Bush asked Israel's coalition government to support Olmert and the peace process, begun at the U.S.-sponsored summit in Annapolis last November.

But Lieberman responded: "This process, this direction of Annapolis, I cannot accept and if I cannot accept this process I must be out of the government." E-mail to a friend

CNN's Kevin Flower, Michael Schwartz and Shira Medding contributed to this report

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