`Tell me - am I dead or alive?'

Jerusalem's busiest market looked like a summer picnic gone horribly wrong yesterday afternoon. Blood trickled down among piles of smashed watermelons; bodies lay covered besides heaps of ripe berries.

"I came to shop, to buy a treat for my children, and suddenly, all around me, dead people," moaned Eva Marim, trembling and wringing her hands as she was helped into an ambulance. "There was noise and things were falling, and there I was on the ground. Somebody tell me - am I dead or alive?"

Two bombs went off, seconds apart, just after lunchtime in the Mahane Yehuda, the bustling Jewish market in the centre of the city. Fourteen people were killed, including two suspected suicide bombers, and more than 150 were injured. Panicking crowds poured from the market alleyways, dragging the wounded with them, as a seemingly unending tide of ambulances screamed up and then away again.

The bomb exploded only two days after Israel and the Palestine Liberation Organisation announced a resumption of talks in their beleaguered peace process. Just yesterday morning there was talk of "great progress" and "new ideas" by both sides. All those new ideas are once again on hold as another bomber has proved there are still those who will go to any lengths to stop peace.

A leaflet signed by the military wing of the militant Islamic group Hamas claimed responsibility for the bombings. It was found outside the gate of the Red Cross offices in the West Bank city of Ramallah.

"In the name of God, with the blessing of God, the brigades of al Qassam, the unit of martyrs to free prisoners, declares its responsibility for the martyrdom operation in Jerusalem," the leaflet said. It included a list of demands, including the immediate release of Sheikh Ahmed Yassin, jailed spiritual leader of Hamas; the immediate release of all Hamas and other Palestinian and Arab prisoners; and an end to Israel's policy of jailing prisoners without charges.

Ominously, it added that the demands must be met by 9pm on Sunday, 3 August, without saying what would happen if they were not. It was signed by the Brigades of Izzedine al Qassam, the military wing of Hamas.

Just a week ago, Ami Ayalon, head of the Israeli General Intelligence, warned the Knesset that tension in the West Bank and Gaza was extremely high and that an attack by Hamas might be imminent.

The Foreign Minister, David Levy, announcing the resumption of talks on Brussels last Sunday, warned then that the key Israeli condition would be an end to violence; this attack is the first in Israel since March.

The deaths raised fears in the rest of the world that the Middle East will descend into a fresh spiral of violence. President Bill Clinton called the bombing a "barbarous act" and pointedly urged Yasser Arafat's Palestinian Authority to take action to stop such attacks. A visit to the Middle East by the US mediator Dennis Ross was postponed to allow a period of mourning in Israel, and Mr Clinton telephoned the Prime Minister, Benjamin Netanyahu, to offer his sympathy.

The Egyptian President, Hosni Mubarak, also called Mr Netanyahu to offer his condolences, while Jordan blamed "extremists" seeking to wreck the peace process.

Mr Netanyahu, visiting victims in hospital, called the bombing "hideous and despicable" and blamed the Palestinian Authority for not stopping violence against Israelis. "This is not a peace process, it is not a process any civilised country would accept."

Yasser Arafat, President of the Palestinian Authority, called the attack a "crime against the peace process", while the Palestinian Legislative Council condemned "the kind of violence we believed was behind us now".

Those words rang hollow to many who survived the bombing.

Dina Hacham was at work yesterday when she heard about the explosion. Her family owns a small shoe shop in the centre of the market and she knew they were all there. Her cousin, David Nasko, 42, was killed, and her mother, father and two young nephews were all injured.

"I am angry at all the Arabs and I am angry at our government for still talking to them," she said, weeping outside her father's hospital room. "When will these things ever stop?"

The Tamimi family, Palestinian Jerusalemites, sat last night in a hospital surrounded by mourning Jewish families. Eyad Tamimi, 18, was seriously wounded. "In a situation like this we are all friends, we are all the same," said his mother, Leila, gesturing to the weeping Jews around her. "We are angry, just like they are. We are worried mothers and want these things to stop."

Diplomacy in shreds, page 10

Leading article, page 15