Jerusalem ? President Bush put an optimistic face on fading hopes for Mideast peace Wednesday, declaring that Israel’s 60-year triumph over war and tragedy shows democracy can succeed everywhere. But Bush’s upbeat message was marred by rocket fire from Gaza and threats of heavy retaliation by Israel.

Intended as an occasion for celebrating Israel’s birthday, Bush’s visit instead brought bursts of fresh violence, ominous warnings and disputed claims that Israel plans to expand settlement activity in the West Bank, a development that could undermine peace talks with Palestinians. It appeared that all sides were vying for the president’s attention.

Bush and Prime Minister Ehud Olmert discussed the peace process and threats to Israel’s security – only to learn that a rocket fired from Gaza had hit a crowded shopping center in the southern Israeli city of Ashkelon. At least 14 people were wounded. Two militant groups, the Iranian-backed Islamic Jihad and the Hamas-linked Popular Resistance Committees, claimed responsibility.

“What happened today is entirely intolerable and unacceptable,” Olmert said at a conference where Bush was honored. “The government of Israel is committed to stopping it and we will take the necessary steps so that this will stop.” The audience erupted in applause before he finished the sentence.

The White House blamed Hamas, which controls the Gaza Strip. “Political goals will never be achieved by launching rockets from Gaza onto innocent women and children,” the White House said.

Welcomed as Israel’s closest ally, Bush was the star guest at an evening of music, dance and speeches marking the 60th anniversary of Israel’s founding in the wake of the Nazi genocide of 6 million Jews. His approval ratings are at record lows at home, but he got a hero’s reception in Israel.

In 1948, the United States was the first country to recognize Israel, 11 minutes after its statehood declaration. In that momentous decision, President Truman broke with his secretary of state, George Marshall, and most of the foreign policy experts.

“Because Harry Truman did what was right instead of following the conventional wisdom, we can say today that America is Israel’s oldest and best friend in the world,” Bush said to cheers from conference guests.