Tel Aviv/Gaza - The Israel Air Force bombed and rocketed Gaza for the third day running Monday, hitting some 40 targets overnight of the Islamic Hamas movement that rules the area, the Israeli military said.

More than 300 Palestinians have been killed since the massive air campaign, codenamed "Operation Cast Lead," started Saturday, just over a week after a fragile, six-month truce between Israel and Hamas formally ended.

Two people have also been killed in Israel by rocket fire, including one who died when a Russian-type Grad rocket struck a construction site in the southern Israeli coastal city of Ashkelon Monday morning.

Israeli Defence Minister Ehud Barak said Sunday that the offensive, aimed at ending rocket and mortar attacks from the Gaza Strip, would continue until all of its goals had been achieved.

The targets struck overnight included the Gaza City office of de-facto Palestinian prime minister Ismail Haniya, of Hamas, as well as rocket-manufacturing workshops and warehouses throughout the Strip, a spokeswoman in Tel Aviv said.

Planes also bombed more smuggling tunnels along Gaza's southern border with Egypt, while the Israel Navy shelled Hamas outposts on the coast and inland, she said.

Palestinian militants, meanwhile, continued their rocket fire, with some nine landing in Israel in two volleys Monday, including one Grad which struck a building under construction in Ashkelon, killing one and injuring some 14 others, one of them seriously, the army confirmed.

Arab construction workers had been taking a break at the site when the rocket struck.

Israeli police, meanwhile, were on high alert to prevent revenge attacks and further widespread rioting by Palestinians as well as Arab Israelis in Israel and the West Bank.

On Monday morning, one Palestinian infiltrated a Jewish settlement west of the central West Bank city of Ramallah Monday morning and stabbed three Israelis before being shot by an armed settler, a military spokeswoman in Tel Aviv said.

She said one of the three Jewish settlers stabbed in the settlement of Qiryat Sefer was in serious condition, while the other two were moderately and lightly wounded. The attacker was also in serious condition and under arrest, she said.

Thousands of Arab Israelis and Palestinians protested against the Gaza campaign in East Jerusalem and in such Arab town as Umm el-Fahm, northern Israel, Sunday, throwing stones and bottles at riot police. At least 50 were arrested, Police Spokesman Micky Rosenfeld said.

Israeli media reported Monday, quoting Palestinian sources, that an Israeli soldier held captive in Gaza by Hamas for more than two years, Gilad Shalit, was also injured in one of the attacks.

"Gilad Shalit is an asset for Hamas and the organization will do everything to keep him alive," said an Israeli security official who spoke on condition of anonymity.

"Israel holds Hamas responsible for his well-being," he said.

Israel launched the deadly and destructive offensive in Gaza after militant factions in Gaza, notably the Islamic Jihad and Hamas, fired more than 180 rockets and mortars at southern Israel in the week after a six-month, Egyptian-brokered truce formally expired December 19.

Since the offensive began late Saturday morning, they fired at least another 160 rockets and mortars at Israel, the army said, while a total of more than 300 targets throughout Gaza have been hit. (dpa)