On edge but faithful to their religious routine, worshippers returned on Wednesday to the Jerusalem synagogue where four rabbis and a policeman were killed in a Palestinian attack a day earlier. The bloodstains had been washed away. But four memorial candles burned as about a dozen men chanted their daily prayers and police newly stationed outside guarded the Kehillat Bnei Torah congregation.

"It's a little scary, but we're going to have to go on with our lives. We're staying here, we're not moving anywhere. This terrorist attack is not going to change anything," said Avraham Burkei, a member of the synagogue in Jewish West Jerusalem.

Palestinians in Israeli-annexed East Jerusalem also voiced fears for their safety amid the surge in violence, as police set up checkpoints in their neighbourhoods and tethered surveillance balloons floated overhead.

In the dead of night, an explosion rattled windows in the city as Israel blew up the home of a Palestinian who last month ran over and killed a baby girl and a foreign woman at a Jerusalem tram stop before police fatally shot him.

Pointing to armed police checking cars and pedestrians on a road leading to the town centre, Imram Abu al-Hawa, a 40-year-old Palestinian, spoke of humiliation and fear of reprisals.

"They (police) say, 'Do you have a knife, where are you going?'" he said. "They can go to hell. I used to work among Jews, now I'm afraid I'll get stabbed or attacked (by them)."

Violence in Jerusalem and other areas of Israel and the occupied Palestinian territories has surged since July, when a Palestinian teen was burned to death by Israeli assailants in alleged revenge for the abduction and killing of three Jewish teens by militants in the West Bank.

The collapse of US-brokered peace talks, renewed fighting in Gaza in the summer, and continued, internationally condemned Israeli settlement-building on land Palestinians seek for a state have also fanned the flames.

In a move likely to aggravate Palestinian anger, Israel on Wednesday approved the construction of 78 new homes in two settlements on West Bank land annexed to Jerusalem.

Growing security fears prompted the Israeli military to propose expanding the use of a "panic button" smartphone app that it is introducing next year to allow civilians to alert authorities about rocket strikes in wartime.

"The app could also include alerts for bombings, terrorist infiltrations and abductions," the project manager, Lieutenant-Colonel Levi Itach of Homefront Command, told Reuters.

Police would receive incident coordinates automatically, and by not requiring users to speak, the app would allow them to hide from would-be assailants.

Concealment helped some survive Tuesday's synagogue attack, in which two pistol- and cleaver-wielding Palestinians hunted down worshippers before eventually being killed by police. The rabbis -- three of them dual US-Israeli citizens and the fourth a British-Israeli national – died along with Druze policeman.

It was the bloodiest such incident in Jerusalem since 2008.

The current violence has defied clear definition. Israeli officials insist it is not a new, tightly organised Palestinian uprising and cannot be compared with the Intifada that raged from 2000 to 2005, during which suicide bombers blew up Israeli buses and cafes and the Israeli army invaded West Bank cities.

For the most part, security guards who tried to prevent and often died in such bombings are no longer posted at the entrance to restaurants and stores in Jerusalem, but they are a lingering presence outside its main indoor shopping mall. So when Ayala, a 39-year-old Israeli teacher, wanted to have coffee with a friend on Wednesday, the complex offered a safe haven.

"We're going on with our lives but with much more caution. We are afraid of the Arabs," said Ayala, who declined to give her last name. "It's deja vu. We understand we are living with people who hate us, deeply."

For Palestinians, a push by far-right Jews to be allowed, in defiance of a decades-old ban agreed by Israel, to pray at a holy compound where al-Aqsa mosque now stands and biblical Jewish Temples once stood, has prompted anger and suspicion.

Israel says it has no intention of changing the site's prayer arrangements and accuses Palestinian leaders of inciting violence. There have been almost nightly clashes in East Jerusalem, with Palestinians throwing rocks and firecrackers and Israeli police firing stun grenades and tear gas.

"It's gone from bad to worse. It's never been this bad," Uday Abu Sbeitan, a 65-year-old Palestinian, said as a police helicopter hovered low over his Mount of Olives neighbourhood. "Women are scared for their children at night, that they might be arrested or kidnapped."

(Reuters)