July 12 (Bloomberg) -- Eight Israeli soldiers were killed in clashes today with the Shiite fundamentalist Hezbollah organization, whose abduction of two soldiers set off a search by Israel's forces inside Lebanon.

Three of the soldiers were slain in the cross-border raid by Hezbollah about 9 a.m. and five more were killed inside Lebanon later after their tank hit an explosive device, an Israel Defense Forces spokeswoman said, speaking on condition of anonymity.

Hassan Nasrallah, Hezbollah's secretary general, said at a news conference in Beirut that the kidnapped soldiers will only be returned in a prisoner exchange. ``Any military operation will not achieve the return of the Israeli soldiers,'' he said.

Today's kidnappings came after Palestinians, led by the Muslim movement Hamas, seized a soldier in a raid from the Gaza Strip into Israel on June 25. That led to Israel's incursion into the Palestinian-ruled enclave, in an operation now entering its third week.

The expanding military confrontation prompted U.S. officials to direct blame beyond Lebanon. President George W. Bush's spokesman, Tony Snow, issued a statement saying the U.S. holds ``Syria and Iran, which have provided long-standing support for Hezbollah, responsible for today's violence.''

`High Tensions'

The abductions by Hezbollah, coupled with rocket attacks, were ``timed to exacerbate already high tensions in the region and sow further violence,'' Snow said, adding that the soldiers should be freed immediately and without conditions.

Israeli Prime Minister Ehud Olmert blamed Lebanon for the attack, calling it a ``warlike'' act that required a ``painful and far-reaching response.'' He said Israel won't consider ``negotiating with terrorists.''

``The murderous attack this morning was not a terrorist act, it was a war-like act by the state of Lebanon against Israel in its sovereign territory,'' Olmert said at a press conference in Jerusalem. The Cabinet held an emergency meeting in Jerusalem late today to decide on how to respond to events in Lebanon.

Hezbollah controls 23 of 128 seats in Lebanon's legislature and holds two Cabinet posts.

Air Attacks

In addition to the ground operations in Lebanon, the Air Force attacked ``scores'' of targets, including bridges and other infrastructure, Udi Adam, who heads the army's northern command, said at a news conference broadcast on Israel Radio. The Air Force also hit Hezbollah bases around Lebanon while soldiers shot a militant trying to infiltrate into Israel, the IDF said in an e-mailed statement.

Lebanese security officials said Israeli warplanes attacked a Palestinian base 10 miles south of Beirut, in the closest raid yet to the Lebanese capital, the Associated Press reported. The IDF couldn't confirm the report.

An army spokeswoman denied reports that Israel had made a general call-up for reserves and said some men were being ordered to their units for ``specific tasks.''

United Nations Secretary-General Kofi Annan condemned the Hezbollah attacks on Israel and said the Israeli soldiers should be released immediately. ``The leaders in the region and around the world should use their influence to press the parties to show restraint and resolve this situation,'' Annan said in Rome.

Shekel Weakens

The Tel Aviv Stock Exchange's benchmark TA-25 index closed down 34.31 points, or 4.2 percent, its biggest one-day decline since Aug. 7. The shekel fell 1.1 percent against the dollar and was fixed at 4.434.

Defense Minister Amir Peretz said Israel holds Lebanon responsible for the fate of the missing soldiers. ``The Lebanese government must take determined and immediate action to find the soldiers, prevent their being hurt, and ensure their return to Israel,'' he said in a statement.

The goal of Israel's operation in Lebanon is to cause ``Hezbollah to be beaten so badly that it rues the moment it started this,'' Peretz said in a statement read by an aide over the telephone.

Nasrallah said at the press conference that the two soldiers were in a ``safe and distant place,'' without providing further details about their condition. ``This is the only way to highlight to the world the plight of our prisoners,'' he said. ``I told several government officials that we couldn't ignore the prisoners and that if there is a chance to capture Israeli soldiers we will do it.''

Gaza Action

The violence on Israel's northern border came hours after its ground forces moved into central Gaza early today in the two-week-old operation. Palestinian security officials and doctors said 24 people were killed by Israeli forces. Among those were five Hamas militants killed in an air attack on a house where they were meeting, they said.

Fifteen were wounded in the attack on the house, including master bombmaker Mohammed Deif, who has been identified by Hamas as one of its top military commanders, the IDF said.

Hamas and Hezbollah both started as Islamic opposition movements, committed to violence to achieve their goals. Both gradually entered politics while retaining their armed wings and ties to Iran. Hamas won Palestinian parliamentary elections in January, the first time it fielded candidates, and Hezbollah has had lawmakers in Lebanon's National Assembly since 1992.

Israel withdrew its troops from a southern strip it held in Lebanon for 18 years in May 2000. Likewise, it quit Gaza last year after it seized the area, with the West Bank and Golan Heights, in the 1967 Six-Day War. Its incursion, which began June 28, started as a hunt for its captured soldier and widened to include operations against Hamas.

`Not Isolated'

Developments in the north indicate that Hezbollah and Hamas are coordinating military action against Israel, according to Gerald Steinberg, a political science professor at Bar Ilan University near Tel Aviv.

``These are not isolated incidents,'' Steinberg said in a telephone interview. ``This major escalation is designed to help the Palestinians divert the Israeli forces into two different combat zones.''

While Nasrallah didn't specify his demands for releasing the kidnapped soldiers his organization now holds, the Palestinian groups that abducted Corporal Gilad Shalit, 19, in June proposed that Israel free 1,400 Palestinian prisoners in its jails, including women and children under 18. Israel refused to release any.

In 2004, Israel agreed to a prisoner swap with Hezbollah, exchanging about 400 Palestinian detainees and the bodies of 59 Lebanese for one Israeli citizen and the bodies of three soldiers.

To contact the reporters on this story: David Rosenberg in Jerusalem at drosenberg1@bloomberg.net Gwen Ackerman in Jerusalem at gackerman@bloomberg.net

Last Updated: July 12, 2006 17:16 EDT