COLOMBO - Sri Lanka's military said on Thursday most of the 27 people killed in a bus ambush were shot by rebels as the passengers tried to flee rather than in the blast that struck the vehicle.

Wednesday's attack came as a 6-year truce between the state and rebels formally ended, paving the way for what analysts forecast will be a military push for the Tigers' northern stronghold and a bloody escalation in a 25-year civil war.

The Tigers were not immediately available for comment on the ambush, but routinely deny involvement.

"There are now 27 people killed," said military spokesman Brigadier Udaya Nanayakkara. "There are now 49 people in hospital as others have been released after treatment.

The death toll was 26 late on Wednesday.

He said nine children were among the wounded, including a one-month-old baby, in the attack in the central town of Buttala around 150 miles (240 km) east of the capital Colombo.

"The terrorists opened fire at people getting down from the bus," Nanayakkara added. "Most were killed and injured due to gunfire, not the bomb."

The Defence Ministry posted photographs of blood-soaked corpses of some of the victims on its Web site. Local television broadcast footage of the bus, showing bloodstains on the floor and personal belongings strewn inside and out.

"This is a brazen demonstration to the whole world of (the Tigers') unchanged commitment to terrorism and the absolute rejection of democracy and all norms of civilised behaviour..." President Mahinda Rajapaksa said in a statement.

VIOLENCE GRINDS ON

Nanayakkara said Tiger fighters shot dead six farmers in the area as they fled the bus attack. A soldier was wounded on Thursday as a team searching for attackers clashed with suspected rebels, the military said.

Violence continued elsewhere.

Air force fighter jets bombed what the military said was a senior rebel leader hideout in the Tiger stronghold of Kilinochchi district, but there were no details.

And troops overran four rebel bunkers in the north-western district of Mannar, killing four Tigers, the military said.

Pro-rebel Web site www.tamilnet.com said the air raid hit a mechanic workshop in a civilian area, wounding seven people and damaging and nine houses.

There were no independent accounts of what was hit.

The Sri Lankan government scrapped the 2002 truce a fortnight ago, deepening fears of an escalation in the fighting.

Sri Lanka's stock market fell 2.1 percent on Wednesday following the attack, and ended slightly weaker on Thursday. Traders expect further losses if violence escalates as expected.

About 70,000 people have been killed since the war erupted in 1983.