Hezbollah's chief Sheik Hassan Nasrallah vowed "all-out war" against Israel on Friday after his home was destroyed, while an unmanned Hezbollah plane struck and damaged an Israeli warship.

Nasrallah and his family were safe after Israeli missiles demolished the two buildings in Beirut's crowded southern neighborhoods, the militant group said.

"You wanted an open war and we are ready for an open war," Nasrallah said, addressing Israelis in an audiotape played on Hezbollah's Al-Manar television.

Meanwhile, four Israeli sailors were reportedly missing after the warship was attacked, and fires aboard the vessel lasted for several hours.

The drone plane that struck the ship was filled with explosives.

The escalating violence came as Lebanese officials urged the UN Security Council to take action during an emergency session Friday, the third day of Israel's bombing campaign against Lebanon.

"Israel's aggression hampers the efforts made towards fostering democracy. It undermines Lebanon's sovereignty as it endeavours to exercise its authority over its entire territory," Lebanon's Foreign Ministry representative Nouhad Mahmoud said on Friday.

But Israel's ambassador to the UN said Lebanon could have prevented the attacks provoked by Hezbollah's kidnapping of two Israeli soldiers.

"Lebanon sadly did not heed the demands of the international community and did not obey the repeated resolution of this council. Today, sadly, the Lebanese people are bearing the cost of this inaction and ineptitude," said Dan Gillerman.

The United States backed Israel in its call to rein in Syrian and Iranian sponsorship of the attacks.

Meanwhile, the death toll continues to rise in the conflict. Over the last three days of fighting, a total of 73 people have died in Lebanon -- mainly civilians -- and 12 in Israel.

Airport, suburbs hit

Israel is ramping up its attacks on Lebanon to put pressure on the government to force Hezbollah to free the captured soldiers.

Hezbollah guerrillas retaliated for Friday's air strikes by launching rocket attacks on more than a dozen communities in northern Israel.

U.S. President George Bush spoke with Lebanese Prime Minister Fuad Saniora over the widening conflict.

In a statement issued by Saniora, the Lebanese PM said Bush has "affirmed his readiness to put pressure on Israel to limit the damage to Lebanon as a result of the current military action, and to spare civilians from harm."

However, Bush did not call for the ceasefire that Lebanon is pressing for.

On Friday, Beirut airport officials said one of the three runways at the airport was hit by two Israeli missiles by mid-morning. The airport was closed on Thursday after Israeli warplanes struck the runways.

Israel widened its attacks by also striking residential buildings, roads and bridges around Hezbollah's security headquarters in the Beirut suburb of Haret Hreik.

The headquarters had been the intended target, the Israeli military spokesman's office, according to The Associated Press. However, an AP photographer who toured the area Friday said he saw no damage near the building.

Israel had warned that south Beirut might be hit and dropped leaflets Thursday night telling people to stay away from the area.

Early Friday, Israeli planes also struck a fuel storage tank at a power station south of Beirut today, and a main highway between Beirut and Damascus.

Warships also blockaded Lebanon's ports for a second day.

Hezbollah fires rockets

Hezbollah guerrillas fired 20 rockets at three communities in northern Israel on Friday, wounding at least 11 people -- one seriously, according to the army and police.

The Israeli Defence Force said the rockets fell in Safed, Nahariya and Hatzor.

On Thursday, Hezbollah militants had threatened to fire rockets into the northern Israeli port city of Haifa. However, the group denied responsibility for the two rockets that did hit yesterday.

Haifa, Israel's third largest city, is around 30 kilometres from the Lebanese border and was previously thought to be out of Hezbollah's range.

Eight Israeli soldiers and two civilians have been killed and more than 50 wounded in rocket fire since militants kidnapped two soldiers -- prompting Israel to retaliate with a massive offensive in Lebanon.

"We cannot tolerate a situation where a terrorist organization is operating from a sovereign country on our northern border and threatening well over half a million Israeli civilians,'' said army spokesman Capt. Jacob Dallal.

UN Secretary-General Kofi Annan said he planned to send three veteran UN officials to the Middle East to try and defuse what he called a "major crisis."

In a joint news conference Friday, British Prime Minister Tony Blair and Canadian Prime Minister Stephen Harper, said the escalating violence in the Middle East must be addressed by the Group of Eight, meeting this weekend in Russia.

Israel and Lebanon have a history of conflict, punctuated by a full-scale Israeli invasion in 1982, and its 18-year occupation of a buffer zone in southern Lebanon that was intended to prevent attacks on Israel.

The last major Israeli air, ground and sea offensive against Lebanon was in 1996 when about 150 Lebanese civilians were killed.

The instability in the Middle East has contributed to a spike in oil prices, which briefly rose above $78 US a barrel Friday, before closing the day at $77.03 on the New York Mercantile Exchange.

With a report from CTV's Janis Mackey Frayer and files from The Associated Press