Defense Minister Amir Peretz said Sunday that the deaths of seven Palestinian civilians on a Gaza beach Friday could have been down to "internal Palestinian causes," rather than by Israel Defense Forces artillery fire.

Prime Minister Ehud Olmert said Israel was conducting an honest investigation into the matter. "This unfortunate experience teaches that legends are created around things like this," the prime minister said, ahead of a trip to the United Kingdom where he is to meet with British Prime Minister Tony Blair on Monday.

An investigative panel, headed by an IDF general, was appointed to determine the circumstances of the incident and is looking into this possibility, while also examining whether IDF artillery fire was responsible, Peretz told the cabinet on Sunday during a briefing on the initial findings of the investigation.

The findings, submitted by the panel to the defense minister on Saturday evening, point to IDF shelling as the cause of the blast. Of six shells fired in the area, said Peretz, the landing site of one remained unaccounted for. However, he added, there is a gap between the time in which the shells were fired and that of the explosion on the beach.

The defense minister told the committee to submit its complete findings by Tuesday.

In the wake of international condemnation after Friday's incident, Prime Minister Ehud Olmert told the cabinet on Sunday he "categorically rejects all the attempts to impugn the morality of the Israel Defense Forces."

"The Israel Defense Forces is the most moral army in the world. It has never conducted a policy of harming civilians, and is not doing so today," Olmert continued.

Peretz is leaning towards curbing artillery fire towards the Gaza Strip to a minimum. In the meantime, IDF shelling has been suspended until the conclusion of the army inquiry.

Eyewitnesses reported that a barrage of shells landed on the northern coast of the Gaza Strip on Friday at approximately 5:15 P.M. local time, causing the deaths of seven members of the Ghalia family and injuring close to 40 others, among them many children as well as five other members of the Ghalia family.

Ayham Ghalia, 20, told Haaretz that, initially, a hollow shell landed almost 300 meters away from the family, causing a loud noise which prompted beachgoers to begin to flee the scene. Ghalia's family, however, did not manage to run away in time.

"Suddenly, an explosive shell landed on us and his us directly," Ghalia said. "I got up and I couldn't believe it. Body parts were [flying] in every direction. My sister's hand was dismembered. My father was already dead, lying face down on the sand."

One of the television cameras at the scene shot footage of seven-year-old Huda Ghalia running in the sand in search of a family member who was still alive.

Upon discovering her father's dead body, she screamed: "My father is dead, my father is dead." Three of the wounded were rushed to hospitals in Israel for medical care.

At the IDF's Gaza divisional headquarters, military brass held an extended briefing Saturday, the conclusions of which were presented to Chief of Staff Lt. Gen. Dan Halutz and Peretz.

"We still do not have an exact analysis of what happened there," military sources told Haaretz on Saturday. "The most reasonable explanation that has been heard is that it was a firing of a shell which veered off its path, however all data relating to the pinpoint location of the shells' landing are not consistent with this [theory]."

IDF figures show that six shells were fired in the direction of open fields in the northern Gaza Strip near the time of the explosions. The six shells, however, landed hundreds of meters from the site of the blast.

IDF officials requested that the Palestinian Authority provide exact information as to the location of the explosion and the time it occurred, however the PA has yet to accede.

Conversely, the odds that a Qassam rocket caused such extensive damage appear extremely slim. It is difficult to see why Palestinians would attempt to launch an explosive device from the Gaza coast, an area visited by hundreds of civilians.

International reaction The U.S. on Friday night expressed regret over the deaths of the seven Palestinians killed in IDF shelling on a Gaza beach, and called on both sides to show mutual restraint and avoid actions that could increase tensions following the strike.

The U.S. noted that the Israeli government had also issued a statement of regret and had launched an investigation.

"We call on the Palestinian Authority to prevent all acts of terrorism, including the firing of missiles and rockets from Gaza," said State Department spokesman Sean McCormack.

The U.S. has been in contact with Palestinian Authority Chairman Mahmoud Abbas and the government of Israel and will continue to monitor the situation closely, McCormack said.

France's Foreign Ministry also expressed regret Friday over the shelling, calling the strike "disproportionate" and urging calm in the region.

The statement from Paris comes days before Prime Minister Ehud Olmert is expected in the French capital for talks with President Jacques Chirac and other leaders.

"France deplores Israel's bombardments on a beach in the Gaza Strip, whose disproportionate character has cost the lives of several civilians and injured many others," a Foreign Ministry statement said.

France expressed its condolences to relatives of the victims and urged "restraint among the two parties, to put an end to the spiral of violence," the statement said.

Lebanon, Syria denouce shelling Lebanon and Syria on Saturday joined in denouncing the artillery strike on the Gaza beach a "massacre", and Lebanon's prime minister called for an international investigation.

Lebanese Prime Minister Fuad Saniora called for "an immediate international investigation into this condemned crime" by the United Nations and Arab League to punish the perpetrators.

In a statement issued by his office, he said the latest attack "confirms once again that Israeli crimes against the Palestinian people were continuing, unrestrained, under the eyes and ears of the international community."

"Only a decisive stand by the international community can put an end to these continuing massacres in Palestinian territories," Saniora said.

Syria also strongly denounced the attack, calling it a "massacre." A Syrian Foreign Ministry statement condemned all "acts of violence and aggression which Israel is incessantly practicing against the Palestinian people."

The statement, carried by Syria's official news agency SANA, said the strikes were aimed at undermining Palestinian national unity and urged Palestinian leaders to "foil this plan by remaining commiting to their national unity."

Egypt: 'Unacceptable' strike on Gaza civilians contravenes international law Egypt on Friday condemned the IDF shelling, saying the excessive use of force by Israel in densely populated areas was against international law.

Egyptian Foreign Minister Ahmed Aboul Gheit "expressed his condemnation of the Israeli shelling of Gaza," the Egyptian state news agency MENA said.

"The use of force by Israel in the Palestinian territories is a principle unacceptable in itself and responsibility for security in the territories is entrusted to the Palestinian Authority," he added.

"International law bans the use of force in this excessive manner in densely populated areas because shelling civilian areas by plane and ship is bound to cause civilian casualties," he said.

Aboul Gheit called on Israel to hold an inquiry into the attacks and to refrain from such acts in the future, MENA added.

EU and Britain express concern Abbas called European Union foreign policy chief Javier Solana to discuss the shelling, after which Solana's office told Haaretz that, "The EU is concerned by developments in Gaza and calls on the IDF to curb its actions in the area."

A spokesman from Solana's office added that, "The EU is aware of the security issues Israel faces as a result of terror activity in Gaza, but is concerned by the implications of IDF actions in densely population areas." She went on to say that Solana will discuss the matter of civilian casualties during his meeting with Foreign Minister Tzipi Livni, at a meeting of European foreign ministers in Luxembourg on Monday.

British Foreign Secretary Margaret Beckett also expressed her government's concern over the killings Friday.

"We are deeply concerned by reports of the deaths from Israeli shelling of civilians, including children, on a Gaza beach this afternoon," she said. "The killing of innocent civilians is utterly unacceptable and we urge the Israelis to undertake an investigation into this incident. I will raise this with my Israeli counterpart when I see her on Monday."