(Adds new air strike, updates casualties)

By Nidal al-Mughrabi

GAZA, Jan 17 (Reuters) - Israeli air strikes killed at least seven Palestinians, including a mother and child, in the Gaza Strip on Thursday as Prime Minister Ehud Olmert vowed to wage a "war" to stop rocket attacks on the Jewish state.

The escalation in violence prompted Palestinian leaders to warn that renewed peace talks -- spurred by last week's visit by U.S. President George W. Bush -- were at stake.

The latest in a series of air strikes killed two Hamas militants and wounded three others, Hamas said.

A prior Israeli air strike on a car in the Gaza Strip killed at least one Islamic Jihad militant, as well as a mother and child riding in a donkey cart, Palestinian hospital officials said. A third air strike killed a militant leader and his wife.

Militants in the Hamas-controlled territory have fired close to 100 rockets at southern Israel in the past two days following the killing of 18 Palestinians, most of them gunmen, in some of the heaviest fighting in months in the Gaza Strip.

"A war is going on in the south, every day, every night," Olmert said in a speech in Tel Aviv. "We cannot and will not tolerate this unceasing fire at Israeli citizens ... so we will continue to operate."

"This war will not stop," the prime minister said, predicting Israeli military pressure would "tip the scales" and force a halt to rocket fire.

Olmert, saying Israel sought to avoid harming Palestinian civilians, gave no indication he might order a large-scale ground operation in the Gaza Strip, an assault Israeli officials have cautioned could cause heavy casualties on both sides.

The administration of Palestinian President Mahmoud Abbas has condemned the Israeli operations in Gaza and arrest of militants in the occupied West Bank as "a slap in the face" to efforts by Bush to achieve a peace treaty by year's end.

Abbas's Palestine Liberation Organisation (PLO) issued a terse statement condemning Israeli military actions in Gaza and warning of "serious consequences" for the peace talks.

Olmert said he remained committed to moving forward in peace talks "without hesitation". But he was vague on a timeframe for a full treaty, saying he hoped within a year to negotiate "understandings" with the Palestinian Authority that would lead to a final agreement.

MILITANT LEADER

The latest attack on Thursday hit a Hamas military outpost in Gaza City killing two gunmen, the Islamist group said.

The two other air strikes targeted cars in the northern Gaza town of Beit Lahiya.

One of the air strikes killed Raed Abu al-Foul, a leader of the Popular Resistance Committees (PRC), and his wife. An army spokesman said the strike hit a vehicle carrying Islamic Jihad operatives involved in manufacturing rockets.

The Israeli army said the third air strike targeted a group of militants who had just fired rockets into southern Israel. An army spokesman said the army was checking reports that civilians were killed.

"The fighting is asymmetric. The IDF defends Israel from rocket fire that deliberately targets civilians. The main challenge is defending ourselves against rocket-launching squads that fire from populated areas," the spokesman said.

Israeli forces killed six Palestinians, including three members of a Gaza family, in a botched air attack on Wednesday.

An Ecuadorean volunteer on an Israeli farming community bordering Gaza was shot dead by a Palestinian sniper on Tuesday.

Speaking to reporters while surveying the Gaza border, Israeli Defence Minister Ehud Barak said the army would "deepen" its Gaza operations "until the firing of Qassams will stop".

A U.S. State Department spokesman urged Israel to avoid civilian casualties.

"There have been some Israeli actions that have been described as acts of self-defence. Certainly they have every right to act in their self defence. It's well documented the Qassam rockets attacks have been coming out of Gaza and are unabated at this point," he said.

"Certainly in exercising the right to self defence, we would encourage Israel, as we do with our own armed forces, to make every possible effort to avoid any harm to civilians." (Additional reporting by Nidal al-Mughrabi in Gaza and Ari Rabinovitch in Jerusalem, Writing by Jeffrey Heller in Jerusalem; Editing by Richard Meares)

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