In spite of the blame that it placed on the Hamas-led Palestinian government on Tuesday for the worst suicide bombing in 20 months, the Cabinet decided against launching a large-scale military operation - an apparent attempt to avoid escalating violence in the showdown with the Palestinians.
Officials said Tuesday the measured response would help preserve the strong international front against Hamas. But they said Israel would take all steps it deems necessary, including assassinating terrorists, to prevent further attacks.
Although Islamic Jihad claimed responsibility for Monday's attack and Hamas was not directly involved, its leaders defended the attack as a justified response to Israeli military strikes against Palestinian terrorists.
Interim Prime Minister Ehud Olmert met with top officials and security chiefs for two hours Tuesday to weigh a response. The group decided to hold Hamas accountable because it didn't denounce the bombing.
"Israel sees the Palestinian Authority as responsible for what happened yesterday," said Gideon Meir, a senior Foreign Ministry official.
But Olmert decided against launching a large-scale military operation and blocked a proposal to declare the Palestinian Authority an "enemy entity," participants said.
Such a declaration would have paved the way for direct strikes against the Palestinian Authority. Until now, economic and political boycotts have been the main tools against the Hamas government.
Officials said the government is pleased with the strong international front against Hamas and does not want to jeopardize that through overwhelming military action.
One senior official said it is not realistic to expect Israel to immediately carry out large-scale air strikes as a knee-jerk response to Palestinian violence.
"This doesn't mean you won't see more targeted killings and other operational things," he said. "It has to be done in an effective way that the whole international community will understand."
The official asked that his name be withheld because he was not authorized to discuss government policy with the media.
Officials said responses would likely include assassinations of bombing masterminds, arrest raids of Islamic Jihad operatives in the northern West Bank, where Monday's bomber lived, and tighter travel restrictions in the area. They said they believe the policies, combined with Israel's West Bank separation barrier, have been effective in preventing attacks.
In Washington, President George W. Bush was asked by a reporter whether he had encouraged Israel to show restraint. "I have consistently reminded all parties that they must be mindful of whatever actions they take and mindful of the consequences," Bush said.
Aides to Olmert said he is well aware of the need to maintain international support, especially as he prepares to carry out a unilateral withdrawal from much of the West Bank.
Olmert says he will carry out the pullout if he concludes there is no negotiating partner on the Palestinian side - a likely scenario with Hamas in power.