A senior Israeli security official later said in Tel Aviv that soldiers had seized several million dollars allegedly used to finance "terrorist actions."

"We seized between seven and nine million dollars in cash from 400 accounts of private individuals, families and institutions," the official, who declined to be named, told a press conference.

He said the funds were being used to buy arms and explosives, or to pay off anti-Israeli militants or their families if they were killed.

The raids provoked fierce clashes between soldiers and stone-throwing youths, who were dispersed with rubber bullets, tear-gas and rifle butts.

Moreover, US officials on Wednesday criticised Israel's raid on Palestinian banks in the West Bank town of Ramallah, arguing that the action risks destabilizing the Palestinian banking system.

Meanwhile, two Palestinians and an Israeli died in a gun battle when members of the Al Aqsa Martyrs brigades opened fire on Israelis at the Erez crossing point into the Gaza Strip early yesterday, Israeli military sources and Palestinians said.

Two other Israelis were injured, the Israeli sources said. The dead were the two Palestinian assailants and an Israeli who died shortly afterwards of injuries sustained during the attack.

It was not immediately known whether the Israeli casualties were soldiers or civilians.