Hamas launched a large-scale rocket and mortar attack on Israel this morning, and Reuters comes up with our mega-stupid headline of the day: Flare-up dims truce hopes along Israel-Gaza border.

GAZA (Reuters) – Palestinian militants in the Hamas-ruled Gaza Strip fired dozens of rockets and mortar bombs at Israel on Wednesday after the killing of three gunmen by Israeli troops, dampening prospects for a renewed ceasefire.

Israel Prime Minister Ehud Olmert’s government said it has shown restraint until now but vowed to act if the salvoes continued. Aides to Olmert, who met with his security cabinet, would not say what options were under discussion.

Before nightfall on Wednesday, militants had fired more than 30 rockets and 30 mortar shells at Israel. While most fell in unpopulated areas, two struck homes, causing damage but no injuries.

Along with makeshift rockets that landed near the border, Hamas said it fired two longer-range Grad rockets, and threatened to expand the “circle of fire” deeper into Israel.