A rabbi has been shot and killed near a Jewish settlement in the West Bank amid heightened Israeli fears of retaliation after the Gaza air strike which killed 15 people.

Rabbi Elimelech Shapira was fatally wounded when his car was ambushed near the Alei Zahav settlement on the road to Peduel. Another passenger was wounded.

The al-Aqsa Martyrs Brigade, part of the militant Fatah group, claimed responsibility for the attack.

The killing came just hours after the Palestinian envoy to the United Nations demanded that Israel be brought before the world's new criminal court for the air strike on Gaza City on Monday.

Addressing the UN Security Council, Nasser al-Kidwa said it was the first war crime to have been committed since the International Criminal Court (ICC) opened on 1 July.

The court, which can be mandated by the Security Council to investigate war crimes, should seek to bring the perpetrators of the attack to justice, he said.

Arab nations called the emergency session of the Security Council - the UN's highest body - to debate the Israeli strike, which caused the deaths of a leading militant and 14 civilians, nine of them children.

The session ended without the adoption of a draft resolution calling on Israel to stop its "military aggression" against the Palestinian people, but the occasion was nonetheless used by representatives of both Arab and Western countries to voice condemnation of the Israeli strike.

Mistakes made

In the face of mounting criticism even from staunch allies like the United States, Israeli leaders have acknowledged that a mistake was made by hitting such a densely populated area in order to eliminate a Sheikh Salah Shahada of the Hamas group.

Had we known the result beforehand, we would never have carried out the operation

Aaron Jacob Israeli UN representative

An Israeli F-16 jet dropped a one-tonne guided bomb on the apartment block where Mr Shahada was staying.

Only four of those killed were in the targeted house. The rest - including the children - were in neighbouring buildings.

In an apparent attempt to ease the tension, Israeli Foreign Minister Shimon Peres said on Thursday that Israel would release $45m of frozen tax revenues to the Palestinian authorities.

He also said Israeli forces would withdraw from parts of the West Bank which remained calm.

Shimon Peres: Gaza strike was a "mistake"

But after describing the air strike as a "mistake" Mr Peres told Israel Radio: "I fear that innocent people will pay for it dearly".

Earlier, Israel's representative at the Security Council, Aaron Jacob, said his country was forced to carry out military actions because the Palestinian Authority was failing to "root out terrorism".

He said he regretted the loss of innocent lives, and insisted that if the result of the raid had been known in advance, the army would never have carried out the operation.

Disbelief

His words echoed those of Prime Minister Ariel Sharon, quoted by the Israeli press as saying that if Israel had known there were so many civilians in the building, another way would have been found to kill Mr Shahada.

But some members of the Security Council greeted such statements with disbelief.

Al-Kidwa: Attack was an extra-judicial execution

Irish Ambassador John Ryan said an attack of this sort was bound to cause casualties. "To suggest anything otherwise is disingenuous," he added.

On Tuesday, about 300,000 Palestinians took to the streets for the funerals of the 15 people killed in the strike - many vowing to take revenge.

Officials from Hamas say the group was considering halting its attacks on Israelis when the strike on Gaza City occurred.

After the attack, Abdul Aziz al-Rantissi, a senior Hamas official, said: "I think the retaliation is coming and everything will be considered as a target for our assassins."