Ahmad Arafat, 19, was shot dead near the West Bank city of Ramallah as Israeli soldiers were conducting arrests as part of efforts to locate the three teens, which Israel said were kidnapped near Hebron on Thursday.
Israeli Prime Minister Benjamin Netanyahu has accused the Islamist Hamas movement of snatching the youths, and placed responsibility for their safe return on the shoulders of Mahmud Abbas and his Palestinian Authority which recently formed a pact with the former Gaza rulers.
The Palestinian security sources could not immediately say whether the army had intended on arresting Arafat. They noted he had been released from Israeli prison one week ago.
The Israeli army could not immediately comment on the Jelazoun shooting, but said it was continuing its campaign of detaining dozens of Palestinians throughout the West Bank as part of its efforts to locate the missing youths.
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The youths, one of whom also holds a US passport, are students at Jewish seminaries in the West Bank, believed to have been snatched late Thursday from an area between Bethlehem and Hebron while hitchhiking.
Israeli search efforts were focused on the southern West Bank Hebron area but increased military presence was felt throughout the entire territory, with dozens of Palestinians being detained for questioning, many of them Hamas members.
Late last night Israeli forces had blasted through the door of a Hebron house and arrested two of its inhabitants, wounding one person, Palestinian eyewitnesses said.
The disappearance of the three youths came 10 days after the establishment of a new Palestinian government of technocrats pieced together by Abbas's Fatah movement and Hamas following a unity agreement between rival leaders in the West Bank and Gaza.