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A senior Islamic Jihad fugitive, Khaled Dahdouh, 39, was killed in an explosion while driving in a car in Gaza Wednesday afternoon.
Palestinian police said that Dahdouh was killed in an IAF air strike.
The explosion took place on a busy street in the residential area between Islamic University and the Finance Ministry compound in Gaza City. It knocked out electricity in the area and damaged several cars parked nearby, according to Palestinian police sources.
However, other Palestinian sources said that it was possible the explosion was caused by a work accident.
The IDF denied involvement in the incident, adding that there had been no IAF activity in the area at the time of the incident.
In response to the death of Dahdouh, another senior Jihad member in Gaza, Abu Gandel, threatened to retaliate harshly against Israel.
"The Israelis will pay a heavy price for the stupid actions of their government," he said.
Islamic Jihad has been responsible for the majority of Kassam attacks on Israel from since the Israeli withdrawal from the Gaza Strip this past summer.
Earlier Wednesday, IDF troops operating in the village of Anza, south of Jenin, shot Muhammad Zdaka, an Islamic Jihad fugitive attempting to escape arrest.
Zdaka suffered a gunshot wound to the leg, and after receiving initial treatment by soldiers at the site was taken to hospital in Israel.
He was allegedly involved in planning and carrying out shooting attacks.
Also in Gaza on Wednesday, three masked gunmen kidnapped the director-general of the Palestinian Lands Authority, witnesses said.
The gunmen took Atef Khoudri to an unknown destination. Masked militants have often kidnapped Palestinian and foreign officials, sometimes holding them in custody for several days, but releasing them unharmed.