JERUSALEM: Prime Minister Ehud Olmert on Saturday vowed to stay in office and lead peacemaking efforts with Israel's "enemies and adversaries" despite speculation he could be forced to quit in a bribery scandal.

The Israeli leader is under a police investigation. He denies wrongdoing in his ties to an American businessman. On Thursday Olmert said he would resign if indicted, a move which would be a setback to US President George W. Bush's effort to secure a peace accord before he steps down in January.

But in a speech to the young guard of his centrist Kadima party at a gathering near Tel Aviv, Olmert said he would lead efforts to ensure Israel's security.

"We want to lead the State of Israel to a situation where it can ... put an end to the bloody conflicts which have accompanied our life in this country since its establishment and even beforehand.

"It is our agenda and ... we will not relent, we will work for it with all our strength, I will lead it because there is no other option." He made no mention of the bribery investigation dominating headlines in Israeli media.

Olmert said Israel would continue to battle rocket barrages from the Hamas-controlled Gaza Strip and warned that militants, to whom he only referred as "the other side" would suffer a "painful and harsh blow" as long as attacks continued.

On Friday, a mortar fired from the Gaza Strip killed an Israeli civilian. Later, a series of Israeli air strikes killed five Hamas security men in the enclave. "We will continue to do all that is needed to ensure Israel's military might and its defensive deterrence ... I do not want to exaggerate, we are dealing with the security of Israel and its citizens day and night," Olmert said.

Olmert's resignation could trigger snap elections that polls suggest would catapult back into power hawkish former prime minister Benjamin Netanyahu -- an opponent of ceding occupied West Bank land to Palestinian President Mahmoud Abbas. Olmert has the option of taking a leave of absence, in which case his powers would be assumed by Foreign Minister Tzipi Livni who leads Israel's peace negotiations with the Palestinians.

Israel's centre-left Labour party, traditionally at the vanguard of peace efforts, may break away from Olmert's coalition and run for top office. Such a major shakeup in Israeli politics could be reflected in the West Bank and Gaza Strip, Palestinian territories split between Abbas's secular Fatah and Islamist Hamas since the factions fought a brief civil war last June.