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No one was hurt in the overnight attack in Al-Jaba'ah, where the windows of a mosque were broken and a burning object was thrown inside, said Mayor No'man Hamdan.
"God's mercy and people's alertness when the fire started prevented it from consuming the entire mosque," he said.
Hamdan said Hebrew graffiti was scrawled on the walls, including "Revenge for the Land of Zion" and "Price Tag," a phrase used by Israeli nationalists linked to hundreds of attacks on Palestinian targets since 2008. Some attacks have also targeted Israeli military posts.
The nationalists have warned that for every action taken to curb settler activity, they will exact a price from local Palestinians or even the Israeli military.
Al-Jaba'ah is close to Gush Etzion, a large area of settlements just outside Bethlehem. Israeli settlements in the West Bank, East Jerusalem and other territories occupied by Israel since 1967 are deemed illegal under international law.
Israeli police said they were investigating Wednesday’s attack, which coincided with the 21st anniversary of the Ibrahimi Mosque Massacre.
On Feb. 25, 1994, American-Israeli Baruch Goldstein, a member of the nationalist group Meir Kahane, opened fire in a mosque in the city of Al-Khalil, or Hebron, killing 29 worshippers and wounding more than 100 others.