ISRAEL last night threatened to assassinate Palestinian Prime Minister Ismael Haniyeh if Hamas militants did not release a captured Israeli soldier unharmed.

The unprecedented warning was delivered to Palestinian President Mahmoud Abbas in a letter as Israel debated a deal offered by Hamas to free Corporal Gilad Shalit.

It came as Israeli military officials readied a second invasion force for a huge offensive into Gaza.

Hamas's Gaza-based political leaders, including Mr Haniyeh, had already gone into hiding.

But last night's direct threat to kill Mr Haniyeh, a democratically elected head of state, sharply raised the stakes.

The bid to free Corporal Shalit was brokered by Egyptian President Hosni Mubarak, who last night warned Hamas it faced severe consequences if it did not curb its "extreme stance" and described the growing conflict as a lightning rod for Palestinian vengeance.

Read the full story from The Australian.