JERUSALEM - Israel was on high alert Thursday for possible retaliation after it threatened to kill Hamas militants harboured by the Damascus regime and flew warplanes over Syria's presidential palace.

The army said it was bracing for any strikes by the Syrian-backed Hezbollah, amid international concerns that the escalating crisis between Israel and the Palestinians could spread across the region.

"This measure has been taken due to concerns that the Lebanese Shiite militia Hezbollah or other organizations will try to trigger an escalation of hostilities by launching border attacks," an army spokeswoman said.

Israel army units were placed on alert along the northern border to "be prepared to face any likely scenario", she said.

Hezbollah, also backed by Syria's main regional ally Iran, has carried out several deadly attacks along the Israeli-Lebanese border since Israel withdrew its troops from southern Lebanon in 2000.

Tensions are running high in the Middle East after Israel launched a military offensive in the Gaza Strip on Wednesday to hunt down a teenage soldier captured by Palestinian militants.

Israel has warned that Hamas militants exiled in Damascus, including political supreme Khaled Meshaal, are clearly in their sights over the kidnapping of 19-year-old Gilad Shalit in an attack on the Gaza border on Sunday that also killed two Israeli soldiers.

"Regimes that support terrorism are the ones playing with the Palestinian people's destiny," Defence Minister Amir Peretz warned Thursday.

Israeli warplanes overflew Syrian President Bashar al-Assad's palace in northern Syria Wednesday while the leader was inside, an operation Syrian state television called an "aggressive act and an unacceptable provocation".

"This operation was launched due to the support and protection Syria gives Hamas, which is responsible for the kidnapping of our soldier," the Israeli spokeswoman added.

UN Secretary General Kofi Annan voiced his concern about the escalating Middle East violence, and urged all sides to avoid the conflict spreading.

"We need to be very careful, not only not to escalate but not to expand the area of the conflict," Annan said of the Israeli sortie over Assad's palace.

Public Security Minister Avi Dichter issued a direct threat against the Hamas militants on Wednesday, saying Israel had issued warnings to Syria about the presence of Hamas and Islamic Jihad leaders but they had been disregarded.

"This therefore gives Israel full permission to attack these assassins," said Dichter, a former chief of Israel's domestic security agency Shin Beth.

In particular, Israeli leaders have pointed the finger at Meshaal, with one minister comparing him to Al-Qaeda leader Osama bin Laden.

Meshaal, 50, is one of Israel's most wanted men and famously survived a bungled attempt by Mossad intelligence agents, who tried to poison him in 1997 in Jordan.

"He is definitely in our sights ... He is a target. As someone who is overseeing, actually commanding the terror acts, (he) is definitely a target," said Justice Minister Haim Ramon.

Another exiled Hamas political leader, Mussa Abu Marzuk, said the leadership took the Israeli threats seriously but were not afraid.

"The threats against the leadership of the resistance are not new, it's standard Israeli policy. So we take them seriously and must face them," he said in an interview in Damascus.

But "these threats don't frighten anyone," he said.

Hamas's spiritual leader and co-founder Ahmed Yassin and his successor Abdel Aziz Rantissi were killed in Israeli air strikes within a month of each other in 2004.

Abu Marzuk warned that Israeli military operations would not save the soldier. "Israel must use political means if it wants its soldier back alive," he said.

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