Recent hopes for a Mideast peace agreement were shattered yesterday, as Israeli helicopters launched rockets at Palestinian leader Yasser Arafat's compound in retaliation for the killing of three Israeli soldiers by a mob of enraged Palestinians.

Israeli troops suffered their worst losses yet at the hands of incensed Palestinians, and Israel's combat helicopters attacked several high-profile Palestinian targets. Meanwhile, Israeli tanks rumbled to the outskirts of Palestinian cities.

"This is a declaration of war--a crazy war," said Saeb Erekat, a senior Palestinian official.

Arafat spoke in a conference call with President Clinton and Egyptian President Hosni Mubarak, Arafat's office said yesterday.

Clinton implored Palestinians and Israelis "to stop the bloodshed, to restore calm" and to begin talking rather than fighting.

"I call on both sides to undertake a cease-fire immediately, and immediately to condemn all acts of violence," Clinton said.

In nearby Yemen, suicide bombers in a small skiff blasted a hole in the U.S. warship Cole yesterday at a refueling stop, American officials said.

The blast killed six members of the crew, injured 35 and left 11 missing.

The attack prompted the State Department to issue a worldwide alert, saying it was extremely concerned about the possibility of violence against U.S. citizens and interests. Americans were urged to maintain "a high level of vigilance."

In a parallel travel warning, Americans were advised to defer all travel to Israel, the West Bank and Gaza, and those already there were told to stay at home or get to a safe location. No one has claimed responsibility for the bombing, Defense Secretary William Cohen told a Pentagon news conference.

But yesterday's violence in the Middle East appears to end hopes that Israel and the Palestinians could soon negotiate a truce and bring an end to 15 days of bloodshed that have left at least 95 people dead--most of them Palestinians and Israeli Arabs.

Neither Arafat nor Israeli Prime Minister Ehud Barak seemed intent on peace yesterday.

A smiling, defiant Arafat was cheered by hundreds of Palestinians as he toured the Gaza sites hit by rockets.

"Our people don't care, and don't hesitate to continue their march to Jerusalem, their capital of the independent Palestinian state," he said.

Barak said he held Arafat indirectly responsible for the killing of the soldiers, and said Israel would hunt down those involved.

Barak said Arafat "does not appear to be a partner for peace at this time."

Meanwhile, President Clinton said the attack on the Cole appeared to be an act of terrorism--the worst against the U.S. military since the bombing of an Air Force barracks in Saudi Arabia in 1996 that killed 19 troops.

"We will find out who was responsible and hold them accountable," Clinton pledged.

At a State Department news conference, Secretary of State Madeleine Albright said the United states would not "retreat from our responsibilities" in the region.

"We are operating in a world that is filled with a variety of threats," Albright said. "But that doesn't mean that we can crawl into an ostrich-like mode. We are eagles."

Robert I. Rotberg, director of the Program on Intrastate Conflict, Conflict Prevention, and Conflict Resolution at Harvard's Kennedy School of Government called the eruption of violence "tragic" in its effect on the recent efforts at peace in the Middle East region.

Rotberg said that he expects the U.S. to redouble its pressure on Palestinian and Israeli leaders to hammer out an agreement for peace.

"The U.S. is in no position politically to do more than engage in strenuous peace making initiatives," Rotberg said. "It would be enormously dangerous for anyone to attack Israel, considering the force of an election year, because the U.S. might feel compelled to act."

The violent clashes that have characterized the last two weeks had appeared to be waning in recent days. But when Israeli reservist soldiers made a wrong turn yesterday and ended up near the center of the West Bank town of Ramallah--a hotspot of fighting between Israeli troops and Palestinian rioters--violence erupted again with unprecedented force.

The soldiers, traveling in a civilian car, were chased by Palestinians and sought shelter in the Ramallah police station.

When word of their presence spread, more than 1,000 Palestinians surged toward the building. Palestinian forces tried to keep the mob at bay, but about 10 men broke through a second-floor window where the Israelis were held.

The body of one Israeli soldier was thrown into the street, and a second was dangled down by a rope, where the corpse was stomped and beaten with iron bars.

From the window, Palestinians shook their fists and made "V" signs with their arms for victory. When the attackers emerged with blood-covered hands, the crowd roared with approval.

There has been continued confusion about the number of Israeli soldiers killed. While the army said two bodies were handed over to Israel, Barak later told CNN that three soldiers were "lynched and mutilated."

Up until yesterday, only one Israeli soldier had been killed in the recent violence.

Israeli army officials said the helicopter strikes were a "limited action designed to respond to the barbaric act Palestinians conducted yesterday morning." Deputy Defense Minister Ephraim Sneh said Israel did not intend to "conquer" territory in the West Bank and Gaza Strip under Palestinian security control.

But the assault showed that Israel was prepared to use heavy weaponry the Palestinians do not possess.

The Israeli helicopter assaults first targeted the police station where the Israeli soldiers were killed and the Palestinian TV headquarters in Ramallah. At least 12 people were injured, Palestinians said.

In Gaza City, Arafat's headquarters and buildings near it were hurriedly evacuated. Shortly afterward, a guard house next to the residence was hit, and smoke rose above the compound.

In Ramallah, the police station was reduced to rubble after being hammered by the rockets, and flames poured out of a second building. An angry mob gathered outside the station, shouting "God is great" and raising a Palestinian flag on a damaged wall.

Fighting continued into the night as combat helicopters attacked the main compound of the Palestinian security forces in Nablus. Police officers fled into the street before the shooting began. A firefight erupted in the West Bank town of Hebron, and gunships attacked soldiers in the town of Salfit near Nablus.

Israel also clamped an internal closure on the West Bank, meaning Palestinians could not leave their communities.

In another development, the Palestinian Authority released hundreds of prisoners, including scores of Islamic militants, from jails in the West Bank and Gaza Strip.

The releases caused Israel to go on high alert. "This is a grave act that increases the probability of terror attacks," Barak said.

Members of the Harvard community reacted with shock and sadness at yesterday's downward turn of events.

"We couldn't have anticipated the shock of this," said Bernard Steinberg, executive director of Harvard Hillel. "We're looking internally, trying to educate ourselves and sort out the conflicting data we are getting. We don't want to react without thinking."

Associated Press reports were used in compiling this story.

Staff writer Joyce K. McIntyre can be reached at jmcintyr@fas.harvard.edu.