Israel has warned it is prepared to retaliate with an assault on Gaza, after a rocket attack wounded at least 14 people while US President George Bush was in Israel.

Israeli military intelligence chief, Major General Amos Yadlin, has told the Haaretz newspaper that Hamas, the Islamist group in Gaza, is preparing defensive positions in anticipation of a possible military incursion.

Mr Bush, on a five-day trip in the Middle East, told Israel it could rely on continued US backing to break up terrorist networks.

In remarks to Israel's Parliament he said: "Israel's population may be just over seven million. But when you confront terror and evil, you are 307 million strong, because America stands with you."

Two small Palestinian militant groups claimed responsibility for Wednesday's rocket attack on a shopping mall in southern Israel, which came as Bush held talks in Jerusalem.