Two Israeli soldiers were killed in an anti-tank missile strike on a military vehicle, the Israeli army has confirmed. Seven soldiers suffered light to moderate injuries, The Jerusalem Post said.
Clashes erupted in response to Israeli shells fired on five villages on the Lebanese border Wednesday morning. Following the Israeli forces attack, Hizbullah announced its responsibility for an attack targeting an Israeli military convoy, according to a statement published on the Lebanese Shia group's official website.
The statement added that the attack resulted in the destruction of some military equipment and the injuring of a number of Israeli soldiers.
The Jerusalem Post confirmed that the wounded were taken to hospital for immediate treatment.
A UN peacekeeping soldier from Spain was killed in the attack. The 36-year-old corporal "died this morning during incidents between Hizbullah and the Israeli army in the area of responsibility of the Spanish contingent," the Spanish defence ministry said in a statement reported by AFP.
Israeli Prime Minister Binyamin Netanyahu reacted in a statement published by The Jerusalem Post, warning Lebanon's militant group. "I suggest that all those who are challenging us on our northern border, look at what happened in Gaza, not far from the city of Sderot," Netanyahu said.
"Hamas suffered the most serious blow since it was founded this past summer and the IDF is prepared to act on every front," Netanyahu added.
The Israeli assault on Gaza Strip in summer 2014 lasted for 51 days killed more than 2,000 Palestinians and displaced tens of thousands. Sixty-seven Israeli soldiers were killed in the operation.
In the early morning Wednesday, Israel struck Syrian army positions in response to at least two rockets launched from Syria into the Israeli-occupied Golan Heights.
The Golan Heights were captured by Israel in the Arab-Israeli Six-Day War in 1967.
On 18 January, Israeli forces also killed one Iranian general in Syria alongside four Hizbullah fighters, including Jihad Moughniyah, the son of Hizbullah's late military leader Imad Moughniyah.
Tensions have escalated between Israel and Hizbullah fighters to their highest levels since Israel's 2006 war on South Lebanon, which resulted in the deaths of 1,200 Lebanese, mostly civilians, and 160 Israelis, mostly soldiers.
Hizbullah fighters are battling alongside Bashar Al-Assad forces in the war-torn Syria against the Free Syrian Army and Al-Nusra Front.
In a speech in mid-2013, Hizbullah chief Hassan Nasrallah called on his followers to fight in Syria on Bashar Al-Assad's lines. Nasrallah said that his group was founded to defend Lebanon and fight Israel.
He added in the speech that Hizbullah was entering “a completely new phase of sending its soldiers to fight outside Lebanon."
A retired Israeli army officer, Major-General Israel Ziv, said he believed Wednesday's assault was an attempt by Hizbullah to draw Israel more deeply into the war in Syria.
"Israel needs to protect its interests but not take any unnecessary steps that may pull us into the conflict in Syria," he said.
Netanyahu, who has made security his top priority ahead of parliamentary elections 17 March, said Israel was "prepared to act powerfully on all fronts," adding: "Security comes before everything else."
His office accused Iran of being behind what was described as a "criminal terror attack."
Iran is a major funder of Hizbullah.
In a communique, Hizbullah described Wednesday's operation as "statement number one," indicating that a further response was possible. Nasrallah is expected to announce the group's formal reaction to Israel's 18 January air strike Friday.
In Beirut, celebratory gunfire rang out after the attack, while residents in the southern suburbs of the city, where Hizbullah is strong, packed their bags and prepared to evacuate neighbourhoods that were heavily bombed by Israel in 2006.
In Gaza, Palestinian militant groups praised Hizbullah.
It remains to be seen whether Israel and Hizbullah will back away from further confrontation. With an Israeli election looming and Hizbullah deeply involved in support of Al-Assad in Syria, there would appear to be little interest in a wider conflict for either side.
Regional analysts said they did not expect events to spiral.
"Netanyahu most likely realises that a prolonged military engagement in Lebanon could cost him the election," said Ayham Kamel and Riccardo Fabiani of the Eurasia Group.
"Instead, Israel will pursue limited actions, targeting Hizbullah in Lebanon, but the low scale tit-for-tat exchanges will not broaden into a wider war."