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Two terrorists armed with a pellet gun and knives have wounded three tourists at the Bella Vista hotel in the Red Sea resort of Hurghada.

Three foreign tourists – two Austrians and a Swede – were taken to hospital after the attack.

One of the attackers reportedly tried to drag a female hostage off with a knife to her neck – but was shot by police.

(Image: DS) (Image: EPA)

One of the gunmen is understood to have been killed by police.

The Egyptian minsitry said 21-year-old Mohammed Hassan Mohammed Mahfouz, a student from Giza,was shot dead by security forces.

Another was arrested and is in police custody.

Security services have denied initial reports the jihadis had suicide vests.

(Image: EPA)

The suspected attackers entered the lobby of the hotel armed with knives and an air pistol, according to Egyptian security officials.

A member of the hotel's management staff – who witnessed the incident – said the attackers sneaked into the Bella Vista from a hotel next door, accessing the facility from the beach.

A photo ciculating on social media claims to show an explosive device next to an ISIS flag found at the scene of the shooting.

(Image: TWITTER) (Image: TWITTER) (Image: TRIP ADVISOR)

(Image: YOUM7)

It comes after the terror group – also known as Daesh – attacked Israeli tourists in the capital Cairo in response to leader Abu Bakr al-Baghdadi's call to target Jews "everywhere".

The latest attack in Hurghada bears similarities to the lone wolf attack on the Tunisian resort of Sousse in June.

Gunman Seifeddine Rezgui slaughtered 38 tourists after reaching the beach by sea.

A total of 30 of those killed were British.

Egypt's tourism industry has taken a major hit after a Russian passenger jet was blown up over Sinai in October.

ISIS claimed responsibility for the attack, which killed all 224 people on board.