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GAZA - Hamas and Fatah gunmen exchanged fire on Friday in political turmoil as the long-dominant Fatah faction was threatened with a violent backlash from within after its crushing election defeat by the Islamic militant group.

Hamas, whose shock parliamentary election victory changed the face of Palestinian politics and plunged Middle East peacemaking deeper in limbo, said it would hold talks soon with President Mahmoud Abbas on a "political partnership." But Fatah leaders have rejected a coalition with Hamas.

The United States said it will review funding to the aid-dependent Palestinians if Hamas enters government and Israel suggested it could suspend customs revenue transfers, adding economic uncertainty to the political upheaval.

Some 20,000 Fatah supporters took the streets in angry protests across the Gaza Strip, burning cars outside the Palestinian parliament building and firing rifles in the air. Some Hamas posters were ripped down by the crowd, which burned tires in the streets.

Acknowledging Hamas's new standing as a political powerhouse, Abbas told reporters: "We are consulting and in contact with all the Palestinian groups and definitely, at the appropriate time, the biggest party will form the cabinet."

The militant al-Aqsa Martyrs Brigades, part of Fatah, issued a statement threatening to "liquidate" the faction's leaders if they changed their minds and joined a Hamas-led administration.

At separate rallies, thousands of Hamas backers celebrated their surprise victory.

While Fatah leaders have called for a peaceful transition of power, bad blood runs deep between the secular and Islamist rivals. Many Hamas gunmen still harbor resentment over crackdowns by Palestinian security forces amid peace overtures by Abbas to Israel, which has sought a clampdown on armed groups.

In the first armed clash between Hamas and Fatah militants since Wednesday's vote, three people were wounded in a gun battle near the southern city of Khan Younis.

Witnesses said the violence erupted after Hamas militants were angered by a sermon by a Fatah-appointed Moslem preacher during Friday prayers.

In a later flare up, Hamas gunmen and Palestinian security forces exchanged fire in Khan Younis. A Hamas gunmen and two security officers were wounded in the clash and underscored the difficulties ahead.

With Middle East peace talks frozen since 2000, Israel ruled out negotiations with any Palestinian administration involving Hamas, which is sworn to Israel's destruction and has been behind dozens of suicide bombings.

At the World Economic Forum in Davos, Switzerland, Israel threw into doubt its willingness to continue the transfer of monthly customs revenues totaling tens of millions of dollars to the Palestinian Authority. The money is needed to help pay salaries for 135,000 government employees.

Compounding the Palestinian Authority's worries, the United States said it will review "all aspects" of its aid programs to the Palestinians if Hamas is in the government.

"To be very clear, we do not provide money to terrorist organizations," said State Department spokesman Sean McCormack.

An opinion poll in Israel's Yedioth Ahronoth newspaper showed 48 percent of Israelis favored talking to a Hamas-led Palestinian government, while 43 percent were opposed.

Israel holds a general election on March 28 and interim Prime Minister Ehud Olmert, whose centrist Kadima party is the front-runner, has hinted at unilateral moves to set a border with the Palestinians on Israeli terms.

Israel has already pulled its settlers out of the Gaza Strip without negotiations, citing the current Palestinian government's failure to rein in militants.

"In the Gaza disengagement, Israel opened a window of opportunity. With these elections, the Palestinians have slammed it shut," Israeli Foreign Minister Tzipi Livni said in Tel Aviv.

Speaking in Damascus, Moussa Abu Marzouk, a senior Hamas official, said the movement had a "clear vision for a government of unity -- one in which everyone joins."

But thousands of Fatah supporters, who held protests across Gaza, rejected any coalition with Hamas and called on Fatah's veteran leadership to resign over the debacle. "Corrupt Fatah leaders who caused the election defeat must resign. Fatah must renew itself," one protester shouted through a loudspeaker.

Hamas's capture of 76 seats in the 132-member parliament -- against 43 for Fatah -- was widely seen as a political earthquake in the Middle East, triggered by voter anger at Fatah over corruption and the failure of peace efforts.

Hamas has mostly respected a truce for nearly a year, but says it will not give up its guns or its charter demand for an Islamic state to encompass Israel, the West Bank and Gaza.

1996 ELECTION
1) Fatah: 55 seats
2) Independent Fatah: 7 seats 3) Independent Islamists: 4
4) Independent Christians: 3 5) Independents: 15 seats
6) Samaritans: 1 seat
7) Others: 1 seat
8) Vacant: 2 seats

2006 ELECTION
1) Hamas - 76 seats
2) Fatah - 43 seats
3) PFLP - 3 seats
4) Badeel - 2 seats
5) Independent Palestine-2
6) Third Way - 2 seats
7) Independent/other - 4
8) Independent Christians: 0

CFPA: It would be nice for everyone concerned if Hamas and Fatah killed each other off.
When Moslems don't have Christians or Jews to murder they always have each other to kill.