Prime Minister Ariel Sharon announced tonight that he would "soon" meet again with Palestinian officials, amid one of the biggest surges in violence in the conflict.
At least 18 Palestinians and six Israelis have died in the past 24 hours.
His comments came shortly after Palestinian officials said Israeli F-16 warplanes attacked Rafah in the southern Gaza Strip, wounding eight people, while helicopters against struck Jenin in the northern West Bank.
An Israeli helicopter gunship fired two missiles at a Palestinian security headquarters in the Gaza Strip. The missiles were fired at the Ansar-2 compound, one of the main Palestinian security headquarters in the area. There were no immediate reports of casualties.
The complex was hit by more than 30 missiles yesterday in an Israeli reprisal attack for the killing of six Israeli soldiers in a Palestinian ambush of a military checkpoint they were guarding.
This morning, Israel launched pre-dawn retaliation by warplanes, warships and helicopter gunships on Palestinian security installations across the West Bank and Gaza Strip.
It was one of the heaviest bombardment of Palestinian positions since an uprising against Israeli occupation erupted in 2000, and political sources said Prime Minister Ariel Sharon had decided on an even harsher response in days to come.
Perhaps signaling the depth of Israel's fury, a helicopter gunship fired a missile at an intelligence facility inside Mr Arafat's compound in Ramallah which hit a few meters from the Palestinian leader in his office, Palestinian officials said.
It was the closest Israel has come to harming Mr Arafat in nearly 17 months of bloodshed which US and international mediation has failed to curb.
Mr Arafat, under siege at his West Bank headquarters since early December, emerged defiant.
"The tanks and the missiles and the planes do not terrify us," he told reporters. "The Israelis insist on avoiding the peace process but we will raise the Palestinian flag on the walls of Jerusalem."
The latest bloodshed threatened further escalation of violence that has killed 10 Israelis and 27 Palestinians, including two suicide bombers, since Monday.
In a meeting with key cabinet members today, Mr Sharon approved an increase in the scale and variety of military reprisals, a political source said.
Mr Sharon spokesman Mr Raanan Gissin declined to specify what measures would be taken but said the overnight strikes in the West Bank and Gaza Strip "might be a small example of the kind of operations that would come to end the terror."
An armed wing of Mr Arafat's Fatah faction and the militant Islamic group Hamas issued rival claims of responsibility for the attack on the army post west of Ramallah in which gunmen shot the soldiers at close range in a caravan and then fled.
The Ramallah helicopter strike, in which missiles were also fired at several Palestinian security targets, killed two Palestinians, medics and security sources said.
The attack followed a naval and air bombardment in Gaza City which local hospitals said killed four people at Mr Arafat's seaside headquarters there.
On the edge of the Palestinian-ruled city of Nablus in the West Bank, Israeli forces killed nine Palestinians in several confrontations, local officials said.
The Israeli army said it struck at Palestinian Authority security targets "because the Authority's security services are infected with terror and many of the attackers come from their midst."