Israeli police say a major disaster has been averted after a fire triggered by a bomb at Israel's largest fuel depot was extinguished.

Police say suspected militants detonated a device under the cab of a tanker truck yards from a major storage tank at the depot north of Tel Aviv.

A huge disaster has been averted

Yossi Sedbon, Tel Aviv police chief

In the West Bank, two Palestinians were killed in an explosion at a house in a refugee camp, Palestinian sources said.

Earlier, suspected Palestinian militants were reportedly arrested after Israeli troops entered Palestinian-ruled areas of the West Bank.

The raids came hours after a Palestinian blew himself up late on Wednesday killing two Israelis in the Tel Aviv suburb of Rishon Letzion.

The militant al-Aqsa Martyrs Brigade, which claimed responsibility for Wednesday's attack, vowed to carry out more suicide bombings, as three of its fighters killed by Israel were buried on Thursday.

Depot targeted

Israeli police are investigating how a bomb was placed on the truck, which caught fire after the device exploded at the Pi-Glilot depot.

Tel Aviv Police Chief Yossi Sedbon said "all the findings indicate that it was a terrorist attack".

He said "a huge disaster has been averted" after the fire was put out by truck drivers at the scene.

The tanker was parked about 90 metres (300 feet) from a fuel storage tank in a densely populated residential area.

Israeli media reported the bomb was detonated remotely by a mobile phone.

Israeli incursions

The Israeli military said soldiers arrested 22 Palestinians in pre-dawn raids on Hebron and villages around Jenin.

Earlier, the Palestinian Authority condemned the suicide bombing in Rishon Letzion, saying it had "learned with rage and indignation of the new terrorist attack" which could be "used by [Israeli Prime Minister Ariel] Sharon to justify his aggression against the Palestinian people".

The US also condemned the attack and repeated its call for Palestinian leader Yasser Arafat to move against terrorists.

The blast killed the bomber, an elderly man and a teenager, Israeli police said.

Police said the bomber had dyed blonde hair which was cropped in a punk style to avoid suspicion in an area habituated by Russian immigrants.

Mysterious blast

Two Palestinians were killed when an explosion ripped through a house in the Balata refugee camp near Nablus on Thursday, Palestinian medical sources said.

The cause of the explosion was not known.

The Israeli army said it did not know about the blast.

It came a day after Israeli troops killed a leader of al-Aqsa Martyrs Brigades and two other Palestinian militants in the camp.