The Popular Resistance Committees claimed that it kidnapped Eliyahu Asheri over the weekend.
The militant group issued a statement in Gaza today saying it had executed the 18-year-old.
The group, which has links to the ruling Hamas, had threatened to execute the Israeli if Israel did not halt its invasion of Gaza.
The Australian Jewish News reported this week that Eliyahu’s father, Yitro Asheri, is originally from Adelaide. It said he converted to Judaism 20 years ago and moved to Israel shortly after.
Israel arrests Hamas ministers
Israeli troops arrested 64 members of governing Palestinian party Hamas, including eight ministers, in a massive overnight operation, military sources said.
The officials were arrested in a vast Israeli operation concentrated in Ramallah, the West Bank political capital, and the flashpoint cities Hebron and Jenin and occupied east Jerusalem, Israeli military sources said.
“We have no other choice when it comes to defending Israelis,” an Israeli official, who refused to give his name, said, denying Israel had any intention of using the Hamas officials as bargaining chips to secure the release of a teenage soldier abducted Sunday.
Labour Minister Mohammed Barghouthi was among those arrested in the West Bank city of Ramallah, during an Israeli army incursion into the Gaza Strip to try to release a soldier kidnapped by militants.
Sources said deputy prime minister Nasser al-Shaher and the minister of religious affairs, Nasser Nayef Rajoub, was also arrested in the Israeli raids, which also targeted sites in the southern West Bank city of Hebron.
In response to the arrests, Hamas deputy parliament speaker Ahmed Bahar accused Israel of launching an “open war” to destroy his government.
On Tuesday, Infrastructure Minister Benjamin Ben-Eliezer warned that the country had “no problem entering the Gaza Strip and kidnapping half the Palestinian government”.
Chemical-tipped warhead claim
In further developments, a spokesman for gunmen from the al-Aqsa Martyrs Brigades in the Gaza Strip say they have fired a rocket tipped with a chemical warhead at Israel.
The group had recently claimed to possess about 20 biological warheads for the makeshift rockets commonly fired from Gaza at Israeli towns.
An Israeli military spokeswoman said the army had not detected that any such rocket was fired, nor was there any report of such a weapon hitting Israel.
Witnesses also say an Israeli warplane has fired a missile at the pro-Hamas Islamic University in Gaza City, setting off a huge explosion.
The attack left a large hole in a playground in the university complex, but no one was hurt.
Israel strikes again in Gaza
Israeli planes have also carried out an air strike on the southern Gaza Strip town of Khan Yunis.
“Our aircraft attacked a building in Khan Yunis which was being used to store arms and as a workshop for producing rockets,” an Israeli army spokeswoman told AFP.
Israel has also massed troops around Gaza airport and launched air strikes against a site in Rafah which Palestinian sources said was a training ground for militants from the armed wing of Hamas.
Two air strikes targeted uninhabited areas in northern Gaza frequently used by Palestinian militants to launch rockets.
Earlier, Israel launched a pre-dawn ground and air assault on the Gaza Strip, plunging much of the area into darkness after war planes waged night-time strikes to blow up a power plant and three bridges.
Militants prepared for a potential invasion by building barricades and blocking roads.
Militants claim third kidnapping
Earlier the Al Aqsa Martyrs’ Brigades in Gaza claimed they were holding a third Israeli – an unidentified 62-year-old man – captive.
The Hamas government has proposed releasing the soldier in exchange for freeing Palestinian prisoners held by Israel.
The Popular Resistance Committees, which also claimed the kidnapping of the soldier together with the armed wing of Hamas and the previously unheard of Army of Islam, have called for the release of women and juvenile prisoners from Israeli jails in exchange for information on the 19-year-old soldier.
Israeli Prime Minister Ehud Olmert was quoted earlier as saying by public radio that he would use “extreme means to bring Gilad home” but had no intention of reoccupying the Gaza Strip.
Israeli planes warn Syria
The Israeli army says it has flown warplanes over one of Syrian President Bashar al-Assad’s palaces to warn Syria against supporting Palestinian militants who abducted an Israeli soldier.
Israeli media reports said four planes carried out the overflights at low altitude, early in the morning, and created several sonic booms.
A senior Syrian official said the action was “provocative … and it is totally rejected.”
Israeli leaders have accused Damascus-based Hamas leader Khaled Meshaal of being responsible for the kidnapping.
The United States has offered support for the Israeli action and called on Hamas to free the soldier, Gilad Shalit, but has cautioned Israel to ensure the safety of innocent Palestinian civilians.
President George W. Bush’s spokesman Tony Snow said Israel had “the right to defend itself and the lives of its citizens.”
Though blaming Hamas for the deteriorating situation in Gaza, Snow said “all parties” ought to take steps to restore the security situation.
Meanwhile the State Department said officials in Washington and Tel Aviv were working hard behind the scenes to deploy US “moral authority” to help end the crisis.
The offensive is Israel’s first since pulling its troops out of the enclave last year, ending a 38-year occupation.
Amnesty International called for all hostages to be released and for “an end to the wanton destruction and collective punishment being carried out by Israeli forces in the Gaza Strip.”