Two Palestinians were killed and one was wounded on Thursday in an Israeli air strike in the northern Gaza Strip, a spokesman for the Hamas emergency services said.

The Israeli military confirmed the strike in a statement that said the air force had targeted a "terrorist squad" which had opened fire on troops in an area near Gaza's northern border with Israel.

Israel began a major civil defense drill in the Tel Aviv region on Thursday aimed at simulating the response to conventional and non-conventional missile attacks, the military said.

"The rescue units of the civil defense, police, fire service and Magen David Adom (emergency services) will participate in the exercise," an army statement said.

Israeli Prime Minister Benjamin Netanyahu is seeking cabinet support for a military strike on Iran, the Haaretz newspaper reported on Wednesday, after days of speculation about plans for an attack.

The report, citing a senior Israeli official, said Netanyahu was working with Defense Minister Ehud Barak to win support from skeptical members of the cabinet who oppose attacking Iranian nuclear facilities.

Change and Reform bloc MP Ibrahim Kenaan stressed on Thursday that a law facilitating the return of Lebanese who fled to Israel will be implemented on all those who went to the Jewish state, including those who joined the South Lebanon Army militia or collaborated with it.

Parliament on Wednesday approved the draft law proposed by the bloc leader MP Michel Aoun to facilitate the return of Lebanese who went to Israel after its withdrawal from the South in May 2000.

Two ships carrying medical aid and activists have set sail from Turkey in a new bid to break Israel's blockade of the Gaza Strip, pro-Palestinian activists said on Wednesday.

A statement issued by the Freedom Waves group said the mini-flotilla made up of one Irish ship and one Canadian ship had left Fethiye on Turkey's south coast on Wednesday afternoon and planned to arrive in Gaza on Friday.

The White House said Wednesday it was "deeply disappointed" that Israel decided to speed up settlement building after UNESCO decided to admit the Palestinians, boosting their statehood drive.

"We are deeply disappointed by yesterday's announcement about accelerated housing construction in Jerusalem and the West Bank," said White House spokesman Jay Carney.

EU foreign policy chief Catherine Ashton urged Israel on Wednesday to backtrack on its decision to accelerate building of new settlements in response to Palestinian accession to UNESCO.

"I am deeply concerned by the latest Israeli decisions to expedite settlement activities in response to Palestinian accession to UNESCO," Ashton said in a statement.

Iran is on alert and will "punish" any Israeli strike against it, its armed forces chief of staff, General Hassan Firouzabadi, warned Wednesday amid Israeli media speculation of plans for an attack.

"We consider any threat -- even those with low probability and distant -- as a definite threat. We are on full alert," he said, quoted by Fars news agency.

Israel on Wednesday successfully tested a rocket-propulsion system from a military base in the center of the country, a defense ministry official said.

"This test firing of the rocket-propulsion system had been planned by the defense establishment a long time ago and was carried out as scheduled," the official told Agence France Presse.

Hizbullah has congratulated the Palestinians on winning UNESCO membership, slamming the United States as "racist" over its decision to vote against the move.

"Hizbullah congratulates the Palestinian people on gaining full UNESCO membership, which is their natural right," the Shiite group said.