The Israeli army said it had discovered facilities belonging to the Lebanese Hezbollah in the Bekaa valley built to manufacture precision-guided missiles.

The Israeli army said in a statement issued on Tuesday that these facilities are located near the town of Nabi Sheth in the Bekaa Valley, and that "for fear of bombing" Hezbollah transferred equipment from this compound with the help of Iran to civilian sites in Beirut.

"Iran and Hizbullah established this site years ago with the aim of manufacturing weapons," he said in the statement accompanying photographs taken from satellites supposedly for the facilities.

Israel has said it will counter any effort by Hezbollah to modernize its missile arsenal, while Hezbollah has vowed to respond to any Israeli threat to Lebanese territory.

On Sunday, Hezbollah fired anti-tank missiles at a site in northern Israel. The Israeli army responded by shelling areas in southern Lebanon.

The escalation began last week with Israeli shelling of a site in Syria that killed two Hezbollah guerrillas. The party said Israel had sent two planes that targeted the party's stronghold in the southern suburbs of Beirut.

Hezbollah chief Sayyed Hassan Nasrallah warned on Monday night that he would strike deep inside Israel in the event of a new Israeli offensive.