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The armed wing of Islamic Jihad said it had fired an Iranian-built, Fajr-5 rocket at Tel Aviv.
"We have widened the range of the battle to reach Tel Aviv and what is coming will be greater," the group said in a statement.
This is the first time Tel Aviv has been threatened by missiles since the first Gulf War, when missiles fired by Saddam Hussein's Iraq landed in the city.
Israeli Defence Minister Ehud Barak said: "This escalation will exact a price that the other side will have to pay."
More dead people and back to the old times .. so sad
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