Israel struck targets in Gaza early on Friday after a day of rocket fire along the country's northern and southern borders.
Gaza militants quickly fired off a new barrage of rockets, setting off air raid sirens across southern Israel.
It comes after airstrikes came from Lebanon - forcing people into bomb shelters in northern Israel - on Thursday and two previous days of violence at Jerusalem's most holy site.
These are the latest signs of rising tensions during a sensitive holiday period, with similar fighting in 2021 leading to an 11-day war between Israel and Hamas.
Israel's military said 34 rockets had been fired across the border from Lebanon - with two people hurt - and that 25 were shot down by its Iron Dome aerial defense system.
Another five rockets struck Israeli territory and the rest of the strikes were being investigated, security forces added.
On Wednesday night, Israeli police raided Jerusalem's Al-Aqsa compound, firing stun grenades and rubber bullets to evict Muslim worshippers who had barricaded themselves inside the building.
Over the past two days, tensions have skyrocketed at the sacred compound home to the Al-Aqsa mosque in Jerusalem and along Israel’s tense border with Gaza.
Israeli Prime Minister Benjamin Netanyahu vowed an “aggressive response.”
“We will strike our enemies and they will pay a price for every act of aggression,” he said in a statement late on Thursday, adding that Israelis remain united in the face of external threats despite their political differences.
In a briefing with reporters, Lt Colonel Richard Hecht, an Israeli military spokesman, said the army drew a clear connection between the rocket fire and the recent unrest in Jerusalem.
“It’s a Palestinian-oriented event,” he said, adding that either the Hamas or Islamic Jihad militant groups could be involved.
But he said the army believed that Hezbollah and the Lebanese government were aware of what happened and also held responsibility.
He declined to say how Israel might respond, saying there were “all sorts of scenarios.”
Late on Wednesday night, Palestinian militants in the Gaza Strip fired several rockets toward Israel in protest over the Israeli police storming into the Al-Aqsa Mosque in the heart of Jerusalem’s Old City with tear gas and stun grenades.
On Thursday, Hezbollah condemned Israel’s storming of Al-Aqsa, calling it “a flagrant violation”.
The shrine - the third-holiest site in Islam - stands on a hilltop revered by Jews as the Temple Mount, the holiest site in Judaism.
No faction in Lebanon claimed responsibility for the salvo of rockets, which set off air raid sirens across the country’s north.
A Lebanese security official, who spoke on the condition of anonymity because he was not authorised to speak to media, said the country's security forces believed the rockets were launched by a Lebanon-based Palestinian militant group, not by Hezbollah militants.
The official said there were no casualties on the Lebanese side, while a spokesperson for Hezbollah did not respond to a request for comment.
Both Israel and Hezbollah have avoided an all-out conflict since their 34-day war in 2006 ended with a draw.
Tensions have simmered along the Lebanese border as Israel appears to have ratcheted up its shadow war against Iranian-linked targets in Syria, another close ally of Iran.
Suspected Israeli airstrikes in Syria in recent weeks have killed two Iranian military advisers and temporarily put the country’s two largest airports out of service.
Hecht said Thursday's rocket fire was not believed to be connected to events in Syria.
In Washington, Principal Deputy State Department spokesman Vedant Patel said: "Israel has legitimate security concerns and has every right to defend themselves.“
But he also urged calm in Jerusalem, adding: “we emphasize the importance of upholding the historic status quo at the holy sites in Jerusalem and any unilateral action that jeopardises the status quo to us is unacceptable."
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