Jerusalem (CNSNews.com) - Iran is supplying the Hizballah terrorist organization with rockets that can penetrate deep into Israeli territory, a military source said on Monday.

Tensions flared along Israel's northern border over the weekend after terrorists fired several Katyusha rockets at northern Israeli targets, hitting an Israeli army base and lightly injuring one soldier.

Islamic Jihad in Lebanon said the initial attack was retaliation for the death of one of its senior leaders in Lebanon, which it blamed on Israel. Lebanon is home to more than 350,000 Palestinian refugees and their descendants.

But Israel says no fire can be directed at Israel from the area without the consent of Hizballah.

The attack was the opening volley in a day of cross-border fighting that prompted a vigorous response from the Israeli army.

Israelis in northern Israeli communities were ordered to enter bomb shelters because of the heavy fighting. Two Hizballah gunmen were killed and two Israeli soldiers wounded.

The fighting stopped on Monday when the Lebanese government asked U.N. peacekeepers to broker a ceasefire - but the Lebanese request came only after Israel threatened to extend the fighting to Beirut, press reports said.

According to radio reports, Hizballah members began returning to outposts demolished by Israeli air strikes on Tuesday, with the intention of rebuilding them.

Hizballah rockets landed deeper inside Israel than they have ever reached, military sources confirmed, although they said there was no change in the type of weapon that Hizballah had used.

According to Israeli intelligence estimates, Hizballah now possesses rockets that can go about 125 miles, or twice as far as the old ones. Such rockets are capable of hitting all major Israeli cities including Israel's commercial nerve center in Tel Aviv and the southern Israeli city of Beersheba, the Israeli daily Ha'aretz reported on Monday.

According to the report, the rockets lack a guidance system but can carry a 600-kilogram warhead (1,320 pounds) and can therefore do a lot of damage. Iran is providing the upgraded weapons to boost its strategic options against Israel rather than the capabilities of Hizballah, the report said.

A military source would not confirm the range of the rockets described in the report but said there was "no doubt" that Iran was improving the capabilities of Hizballah.

Hizballah's capabilities are improving each year, said the source. "The Iranians keep giving them more developed weapons." Although the source would not confirm the ranges, she did say that Israel knows the rockets can penetrate further into Israel.

Moshe Marzouk, a senior research fellow at the International Policy Institute for Counter-Terrorism near Tel Aviv, said Iran wants to show that not only does it have the long-range missiles to attack Israel but so does Hizballah.

Hizballah, Iran, Syria front

Both Iran and Syria fully support the actions of Hizballah, Marzouk noted. Syria permits cross-border attacks to take place, and the Iranian Revolutionary Guards train Hizballah as well as supply part of their weapons.

"Hizballah sees itself as a shield and a wall against Western interference in Lebanon," said Marzouk, a former senior Israeli army intelligence officer. "Hizballah sees itself as another arena in the same Iran-Syria-Hizballah [conflict] against the West."

Iran is under threat of international sanctions for its nuclear development program, which the U.S. believes is a cover for the production of atomic weapons. Iranian President Mahmoud Ahmadinejad has said that Israel should be "wiped off the map."

Syria also is under threat of United Nations sanctions unless it cooperates fully in investigations into the assassination of former Lebanese Prime Minister Rafik Hariri last year. Many Lebanese blame Syria -- the power broker in Lebanon for decades -- for the murder of Hariri in a car bomb attack.

Anti-Syrian Lebanese politicians are pushing for the implementation of U.N. resolutions that would require Hizballah, as well as Palestinians in refugee camps, to be disarmed.

In a speech last week marking the sixth anniversary of the Israeli withdrawal from southern Lebanon, Hizballah leader Sheikh Hassan Nasrallah boasted that his group possessed some 12,000 rockets and was capable of hitting targets in all of northern Israel -- which he called "occupied Palestine."

Hizballah wants to prove that it is still the defender of Lebanon, said Marzouk. Nasrallah is trying to sell himself inside Lebanon [by saying] 'Israel is afraid of us. We have the power to hit all of northern occupied Palestine'."

On the other hand, he does not want the situation to escalate out of his control, as it began to do on Sunday, he said. Therefore, the Lebanese called for a ceasefire, he added.

Israel has no interest in an escalation along its northern border, Israeli Prime Minister Ehud Olmert said. But Brig.-General Gal Hirsch warned that if the Hizballah attacks continued, Israel would "know how to retaliate even stronger."

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