IDF Chief of Staff Dan Halutz, speaking after the broadest Hezbollah attacks since the army withdrew from south Lebanon five years ago, said said Tuesday that Israel has a "very diverse basket" of military means at the ready.

"We are ready with a basket of operations. The basket of means in our hands is very diverse, and we will know how to use it with judgment," Halutz said in a briefing.

At least four Hezbollah gunmen were killed on Monday trying to kidnap soldiers from IDF outposts on the Lebanese border, and seven soldiers and four civilians were wounded in the series of clashes.

Israeli warplanes struck in Lebanon early on Tuesday in what Defense Minister Shaul Mofaz described as the largest-scale Israeli response to cross-border attacks by Lebanese guerrillas since 2000. In parallel, IDF bulldozers entered Lebanon to demolish a Hezbollah post just north of the community of Ghajar.

A tense calm obtained along the Israel-Lebanon border on Tuesday, after the Hezbollah attacks had sent Israelis to bomb shelters across the north on Monday.

On Tuesday afternoon, the army denied news reports that warplanes struck for a second time at midday.

Israeli warplanes attacked a suspected Hezbollah target in south Lebanon on Tuesday, a day after IDF troops killed four gunmen in the broadest Hezbollah attacks since the army withdrew from south Lebanon more than five years ago, witnesses said.

Exchanges of fire had continued between the Israel Defense Forces and Hezbollah through the pre-dawn hours Tuesday night, with IAF aircraft pounding a site believed to have been used to fire on Israel.

IDF troops conducted a search near the village of Ghajar following Monday's kidnapping attempt, and an engineering corps unit destroyed a Hezbollah post north of the village on Monday night.

On Tuesday morning, schools and work places were to open as usual in most areas of the north, but Israelis remained in shelters near the Har Dov area.

IDF officers said Hezbollah used Katyusha rockets, mortars, anti-tank missiles and small arms in the attacks on Israeli positions.

Israel Radio reported that IDF Corporal David Markowitz, a paratrooper who is also a yeshiva student, killed most of the gunmen.

The United States, which lists Hezbollah as a terrorist organization, condemned the guerrilla rocket attacks but also urged Israel to exercise restraint in its response.

The UN Security Council, meanwhile, failed on Monday to agree on how to condemn the violence, mainly because of disputes between the United States and Algeria, diplomats said.

After several hours of negotiations, Security Council members gave up trying to amend a statement, drafted by France, that would have condemned "military exchanges initiated by Hezbollah" as well as "Israeli violations of Lebanese airspace."

The United States wanted the reference to Israel deleted and Algeria, the only Arab member of the council, objected to putting the blame on Hezbollah, according to participants at the consultations.

Members agreed to have further discussions but envoys acknowledged the momentum was lost.

The council's deliberations followed a statement issued in Jerusalem by the visiting UN undersecretary-general for political affairs, Ibrahim Gambari. He condemned the clash, which "according to available information began from the Lebanese side" and called on all parties to "cease fire immediately."

Galilee panhandle and Western Galilee residents spent several hours on Monday afternoon and evening in bomb shelters for the first time since the Israeli military withdrew from Lebanon in May 2000.

The incidents were the most serious since three soldiers were kidnapped from the frontier Har Dov area in October 2000. The Shiite organization also fired Katyusha rockets at Galilee settlements and shelled the area.

Senior defense officials decided Monday night on a restrained response, if Hezbollah ceases its fire. Hezbollah sent Israel a message last night via the UN that it is interested in calm, and Israeli officials are inclined to consent. Israel also asked the U.S., EU and UN to pressure the Lebanese government to restore order. Defense Minister Shaul Mofaz did approve a series of more aggressive steps, should the Hezbollah fire continue.