Palestinian factions fought on the streets of Gaza and the West Bank yesterday as the territories slid further into violence and political confrontation.

In Gaza City the Palestinian prime minister, Ismail Haniyeh, appeared before a rally of tens of thousands of Hamas supporters while in Ramallah at least 30 people were hurt, many seriously, in clashes between Hamas and Fatah gunmen.

Tony Blair is due to visit the Middle East shortly to promote an "arc of moderation" in the region and a return to peace talks. On a visit three months ago Mr Blair tried to encourage the creation of a national unity government and raised the prospect of talks between the Israeli prime minister, Ehud Olmert, and the Palestinian president and Fatah leader, Mahmoud Abbas. Since then the unity talks have broken down and there has been no meeting between Mr Olmert and Mr Abbas.

The Palestinian factions traded accusations yesterday over violence in Gaza this week. Hamas accused a senior Fatah figure, Mohammad Dahlan, of trying to assassinate Mr Haniyeh in a gun battle at the Rafah crossing on the Egyptian border on Thursday. The border was closed by Israel, to stop Mr Haniyeh bringing in $35m (£18m) in donations from Islamic countries, then the crossing was stormed by Hamas gunmen. Late at night Mr Haniyeh crossed without the money, but ran straight into a gun battle that left a bodyguard dead and his son injured.

"We are here to be martyrs, not ministers," Mr Haniyeh told the crowd at the Yarmouk football stadium in Gaza yesterday. He pointedly made no call for calm.

Khalil Hayah, head of the Hamas bloc in parliament, repeated that the movement would not recognise Israel - one of the demands that Israel and the west have made of the Hamas government before they end a financial boycott. "We will not recognise Israel and we will not join any government that does recognise Israel," Mr Hayah told the crowd.

Mr Abbas is due to give a speech in Ramallah today at which some think he may raise the prospect of an election early next year. But it is not clear that he has the legal power to do that, nor is it certain that Fatah has regained enough support to win a vote 11 months after its surprise defeat.

There is anger in Fatah. "What is happening here looks like civil war," said Ala'a Yaghi, a Fatah MP. "We see every day killing, kidnapping and shooting ... Hamas has the money and the authority and the rest of the Palestinian people have nothing. How can we change this?"

Mr Olmert says that he regards Mr Abbas as someone he could talk to, but Fatah is struggling on the ground. Ghassan Khatib, a former Palestinian planning minister and now a political analyst, said that it was Hamas that was emerging strongest from the crisis. "Hamas doesn't have any motive to go for a national unity government that involves concessions," he said.

Mr Haniyeh's trip abroad, during which he secured promises of around $350m in funding from Iran, Qatar and Sudan, was seen by many Palestinians as an endorsement of his rule. "That was a message for people here that he received legitimacy in the Arab world," said Mr Khatib.

Despite the donations, Hamas remains far short of the approximately $600m Israel has kept from the Palestinian Authority in tax revenues. But the economic crisis does not seem to have dampened Hamas's support. Mr Khatib said his polling research suggested Hamas would keep its majority if elections were called now.