JERUSALEM - The difficulties facing President Bush in securing a new Middle East peace deal exploded Wednesday when a Palestinian rocket crashed into a southern Israeli medical center as the U.S. president joined world leaders in Jerusalem to celebrate the nation's 60th anniversary.

Hours after Bush met with Israeli leaders to discuss the status of shaky peace talks with the Palestinians, militants from the Gaza Strip scored their most destructive hit on Ashkelon, southern Israel's largest coastal city, about 10 miles north of the Gaza border.

The Katyusha-style rocket decimated a medical center on the top floor of a mall, seriously injuring three people, including an 8-year-old girl and her mother. At least 11 other people were injured in the first such rocket attack on Ashkelon since early March.

With Bush and other world leaders attending during a gala celebration later in the evening, Israeli Prime Minister Ehud Olmert called the attack "entirely intolerable and unacceptable."

"The government of Israel is committed to stop it, and we will take the necessary steps so that this will stop," Olmert said.

The attack from the volatile Gaza Strip served to highlight one of the daunting complexities facing the Bush administration in its final months as the president tries to broker a peace deal between Israel and the Palestinian Authority.

Gaza remains firmly under the control of Hamas hard-liners who refuse to recognize Israel, oppose the Bush administration peace process and stage almost daily rocket attacks on southern Israel.

Hamas seized military control of Gaza last June by routing rival fighters loyal to Palestinian Authority President Mahmoud Abbas.

Nearly a year after imposing an economic blockade on Gaza to try to force Hamas to give in, Israel seems to be moving closer to a military showdown with the Islamist forces.

Even before the attack on Ashkelon, Olmert urged Hamas leaders to accept Israeli conditions for a cease-fire being brokered by Egypt.

"We hope that we will not have to act against Hamas in other ways with the military power that Israel has not yet started to use in a serious manner in order to stop it," Olmert said after meeting with Bush in Jerusalem. "But it entirely depends on responding positively to the principles set forth by me and by the Israeli cabinet in order to stop these operations."

Bush reaffirmed his support for Israel's refusal to talk directly with Hamas. "Hamas' stated objective is the destruction of the State of Israel, and therefore the United States will stand strongly with Israel, as well as ... with the Palestinians who don't share that vision," Bush said.

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