Hezbollah declares 'open war' on Israel

"Zionists, if you want this kind of open war, then let the whole world listen: Let this war be open," he said in a eulogy broadcast on a giant screen at Imad Mughnieh's funeral in the Hezbollah bastion of southern Beirut.

Nasrallah said that by killing Mughnieh in a car bombing in Damascus on Tuesday, Israel had taken its battle with the Iranian- and Syrian-backed militant group beyond Lebanon's borders and should expect attacks anywhere.

"You killed him outside our natural battleground," he said. "Our battleground with you is on Lebanese territory and you have overstepped the border."

"The blood of Imad Mughnieh will contribute to the disappearance of the Jewish state," he added.

With Mughnieh's coffin covered in the Shia Muslim movement's yellow flag, Hezbollah's leader said: "We must start marking the beginning of the fall of Israel.

"The July war is not over, it is ongoing and no ceasefire was ever declared," he said, referring to Israel's 34-day offensive in 2006 that failed to recover two captured soldiers or halt rocket attacks on the Jewish state.

Israel, which has denied involvement in Mughnieh's killing, placed all its embassies, consulates and Jewish institutions on alert after the Beirut speech.

Stepped-up security measures were also recommended for the Israeli airline El Al, as Israel's military radio said Nasrallah was now openly threatening Israeli targets abroad.

Thousands of Hezbollah supporters, including Iran's Foreign Minister Manouchehr Mottaki, gathered for the funeral of Mughnieh, who was linked to notorious attacks against US and Jewish targets in the 1980s and 1990s.

Mottaki read a message of condolence from Iranian President Mahmoud Ahmadinejad, while Iran's supreme leader Ayatollah Ali Khamenei sent a similar message to Nasrallah.

"Dear brother... I congratulate and offer my condolences on this great martyrdom to you, his family, the Hezbollah youth and all Lebanese," Khamenei said.

"It should make the Lebanese people proud to have given the world such great men in the fields of seeking freedom and fighting cruelty," he said.

Mughnieh's funeral took place in a packed Hezbollah complex just as the anti-Syrian ruling majority wound up a mass rally in central Beirut to commemorate the third anniversary of ex-premier Rafiq Hariri's assassination.

A spokesman for the Shia group that heads the opposition in Lebanon said 20,000 people were inside the complex located in the southern suburbs stronghold of Hezbollah. Thousands more were gathered on the streets.

"Sayyed Hassan Nasrallah need only say one word for us to fight the Zionist enemy," shouted Ali Zaydan, a Hezbollah supporter.

Another supporter said he and others stood ready "to follow the example of Mughnieh and become martyrs".

Mughnieh, in his late 40s, was on America's Most Wanted list for a string of attacks against Westerners and Israelis, notably the bombing of the US marine barracks in Beirut in 1983 and the hijacking of a TWA flight in 1985.

The United States offered a reward of up to $5 million (Dh18m) for information leading to his arrest after the TWA hijacking in which a US navy diver was killed.

Mughnieh was also wanted for the 1992 bombing of the Israeli embassy in Buenos Aires that killed 29 people, and for the 1994 bombing of a Jewish Cultural Centre in the same city in which 86 people died.

Washington welcomed his death, with a US State Department spokesman saying the world would be "a better place" without him. (AFP)