Hezbollah hits Israeli warship

Despite fears the assault could bring down the Western-backed, anti-Syrian government of Lebanon, Israeli Prime Minister Ehud Olmert vowed the campaign would continue until Hezbollah guerrillas, who are backed by Syria and Iran, lose their near-control of southern Lebanon bordering Israel.

Olmert agreed in a phone call with U.N. chief Kofi Annan to allow U.N. mediation for a cease-fire — but only if the terms include the disarming of Hezbollah and the return of two Israeli soldiers whose capture by the Muslim guerrillas Wednesday triggered the fighting.

Hezbollah rained dozens of rockets on towns in northern Israel. One rocket hit a home in Meron, killing a woman and her grandson. Some 220,000 people in northern towns hunkered down in bomb shelters.

Nasrallah was not hurt after the Israeli missiles demolished his headquarters among two buildings in Beirut's southern neighborhoods, the militant group said. Three people died in the airstrikes.

The attack on the warship was apparently timed to coincide with Nasrallah's message on the militant group's television station. "The surprises that I have promised you will start now. Now in the middle of the sea, facing Beirut, the Israeli warship ... look at it burning," Nasrallah boasted.

Israeli military officials said the drone apparently was developed by Hezbollah. The Lebanese guerrilla group has managed to fly unmanned spy drones over northern Israel at least twice in recent years.

"If they kill us all, we will still not give them back the prisoners," said one resident, Nasser Ali Nasser, as palls of smoke rose from fuel depots hit farther south. "We have nothing left to lose except our dignity. We sacrifice ourselves for Sheik Nasrallah," he said.

President Bush, who has backed Israel's right to defend itself, spoke by phone with Lebanese Prime Minister Fuad Saniora from a G-8 summit in Russia and "reiterated his position" that the Israeli attacks should limit any impact on civilians, White House spokesman Tony Snow said.

But the promise fell short of the Lebanese leader's request for pressure for a cease-fire.

Israel's campaign appeared to have a two-pronged goal. One was to batter Hezbollah and end its near control of the south on Israel's borders.

"We know it's going to be a long and continuous campaign and operation, but it's very clear. We need to put Hezbollah out of business," Brig. Gen. Ido Nehushtan told The Associated Press.

Israel's army chief, Lt. Gen. Dan Halutz, said Hezbollah has rockets that can reach as far as 43.5 miles or more, which would bring more Israeli cities, such as Hadera, within range.