Speaking at the opening of a Tel Aviv conference hosted by the Institute for Security Studies, Olmert said "the situation in the southern part of the country, because of the Qassam rocket fire, created a difficult reality. We will have to operate on this matter in the appropriate dose at the right time and without exaggerating with unrealistic expectations," he said.
Olmert spoke shortly before the IDF concluded an operation in the Gaza Strip, aimed at curbing the ongoing Qassam fire, which left eight Palestinian gunmen dead and four IDF troops lightly wounded.
Meanwhile, Palestinian officials warned Tuesday that IDF raids in the Gaza Strip endangered the newly revived peace process, coming a day before the first Israeli-Palestinian peace negotiations in seven years.
Dozens of IDF tanks and armored vehicles moved into Gaza on Tuesday morning, setting off clashes with Palestinian militants firing rocket-propelled grenades and mortar rounds.
"The Israeli policy of escalation aims to sabotage and place obstacles before the negotiations even before they start," said Nabil Abu Rudeineh, a spokesman for Palestinian President Mahmoud Abbas. He called for the international community to intervene to end the incursion.
Israel Air Force planes providing cover killed three unidentified militants, soon after three militants were killed by an IDF tank shell, including one from the Popular Resistance Committees. Four soldiers were lightly wounded after an anti-tank missile was fired at their vehicle, and were evacuated to Soroka Medical Center in Be'er Sheva.
Earlier Tuesday, two Palestinian militants were killed in two separate IAF strikes in northern Gaza.
An IDF spokeswoman confirmed that about 10 tanks and armored vehicles entered southern Gaza as part of a routine operation against Palestinian militants.
The operation focused on an area that is a main launching ground for rocket and mortar assaults on army bases and the Israeli-controlled Sufa crossing into Gaza. More than 15 militants have been killed in the area in recent IAF airstrikes.
IDF troops in the southern Gaza operation took over the rooftops of several homes and detained about 60 people for questioning in house-to-house raids, residents said.
The violence came a day after Olmert pledged to forge a historic path toward a final accord with Abbas' moderate West Bank Palestinian government. On Wednesday, the two sides are to launch their first formal peace talks in seven years at the historic King David Hotel in Jerusalem.
Among Israel's targets was a multi-story building that suffered heavy damage. Amid the rubble, at least two militants lay dead, including one man whose body was torn in half by a blast. As rescuers pulled the bodies away, two Israeli shells struck the building seconds apart, sending people scrambling for cover. The body of a third man lay motionless after the blast.
Schoolchildren ran through the streets of Khan Yunis, let out early from school so they could take refuge in their homes.
In Khan Yunis, militants carrying land mines and other weapons dodged among houses and maneuvered behind the tanks to fire at troops. Others took cover behind trees or covered themselves in leaves to camouflage themselves in open farmlands. into Gaza.
More than 15 militants have been killed in the area in recent IAF airstrikes.
"They believe that such operations will harm the resistance and weaken it, but they are mistaken," said Hamas spokesman Fawzi Barhoum.
Although Israel has warned that a major operation against Gaza militants was in the offing, it has said now is not the time for such action. The army said Tuesday's incursion was nothing out of the ordinary.
Earlier Tuesday, a Qassam rocket fired by Gaza militants struck and industrial center in the western Negev city of Sderot. No injuries or damage were reported.
IDF soldiers arrest 12 Palestinians in West Bank raids
In the West Bank, IDF soldiers arrested 12 wanted Palestinians early Tuesday, Israel Radio reported.
In the West Bank city of Nablus, a Palestinian militant died when an explosive he was planning to use against IDF troops detonated accidentally, local residents said.
Hospital officials identified the dead man as a militant from the al-Aqsa Martyrs Brigades, an offshoot of Palestinian President Mahmoud Abbas' Fatah movement. They said three other people were wounded by the explosion.