By Gustavo Palencia

TEGUCIGALPA, Honduras, Oct 18 (Reuters) - Almost three decades after El Salvador and Honduras fought a short but fierce "Soccer War" that killed thousands, tensions over their disputed border are again on the rise.

Honduras' Congress said in a resolution late on Tuesday that the country's sovereignty was being threatened by its Central American neighbor.

"If we want peace, we have to be ready for war," said Roberto Micheletti, the president of Congress and a prominent figure inside the ruling Liberal Party, adding that Honduras needs to beef up its armed forces.

The latest twist in a century-old dispute is centered on the tiny, uninhabited island of Conejo, or "Rabbit", which lies just off the Honduran mainland in the Gulf of Fonseca between the two neighbors.

Honduras has always considered Conejo its own and protested last week after El Salvador's armed forces included the island in a book on territorial defense.

El Salvador's President Tony Saca dismissed the complaints, and reiterated his country's claim on the island.

In 1969, Honduras expelled masses of Salvadoran peasants, and fighting broke out during two World Cup qualifier matches between the rival nations.

The so-called Soccer War lasted just 100 hours but the bloody army skirmishes killed some 5,000 people.

Neither side won a decisive military victory and a cease-fire was quickly called. Peace was finally signed in 1980 and the International Court of Justice fixed the border in 1992, giving Honduras most of the disputed territory.

Conejo was not part of the dispute that led to the Soccer War, however, so its ownership was was not addressed in the 1992 ruling.

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