The PLO is rethinking terrorism against Israelis, it said, sending Israeli stocks up Monday after a slow and jittery start on war drumming emanating from Washington.

Specifically, Palestinian Authority chairman Yasser Arafat's Fatah faction has drawn up a draft document in talks with European Union mediators calling for a halt to attacks by Palestinian militants on Israeli civilians, a senior Fatah official said on Tuesday. Not that the reassurance has done anything to assuage fears of a terror attack in the United States, or here, on the eve of the September 11 memorial day.

Despite the positive momentum, traders expect the uncertainty to keep turnovers lower than usual, although the Tel Aviv Stock Exchange retained its resilience yesterday despite drooping exchanges in Europe.

Steep gains of 2% to 3% in European exchanges also boosted the local mood, as did Monday's gains on Wall Street despite the surge in oil prices. Brent crude shot up to $29.9 the barrel last night as analysts speculate about how an American attack on Iraq will affect oil prices. Some see a climb to $40 to the barrel, which could spark an inflationary surge.

As for the Tel Aviv Stock Exchange , the Maof-25 index finished up 1.3% while the TA-100 index gained 1.1%, while tech stocks sustained gains of 0.8%. Total turnover was heavier than usual for recent weeks at over NIS 210 million, but still low compared with recent years, however.

The banks remained in the limelight, with

Bank Hapoalim(TASE:

POLI

) losing its morning gains to finish 0.3% higher on heavy turnover of NIS 21 million. Yesterday the bank's shares rose by 0.8%.

Bank Leumi Le-Israel(TASE:

LUMI

) ended roughly where it spent the whole day, at a gain of 0.5% on sporadic action, reversing its 0.5% droop of yesterday. Turnover was NIS 13 million, less than posted in recent weeks.

Market players say interest in Leumi has waned for the moment because the state will shortly be releasing a flood of shares - 6% to 7% of the bank's share capital onto the market. Investors wanting to buy Leumi are waiting for that offering, traders say.

By the way, representatives of both Hapoalim and Leumi have flown to Cyprus to meet with representatives of Moody's and Standard and Poor's for a "routine meeting", after the rating agencies' officials declined to fly to security-stricken Israel.

Certain tech stocks moved briskly, including

Elbit Systems (TASE:

ESLT

), which lost a morning edge to drop 1.1% on lively trade, and

Tadiran Wireless Communication Industries (TASE:

TheStreet Recommends

TACM

), which gained 0.8%. Both companies engage in defense systems, again the result of the war talk, say market sources. Interest in Tadiran has also been sparked by the recent conversion of options, which brought the company NIS 57 million.

Drug companies have been in the limelight, possibly for the same reason. A perennial favorite,

Teva Pharmaceuticals

(Nasdaq:

TEVA

), gradually climbed to 1.8% on turnover of NIS 22 million after last week reporting two new United States Food and Drug Administration approvals for 67-milligram fenofibrate capsules, used to treat excessive levels of triglycerides in the blood, and for cefaclor, an cyclosporin antibiotic. Turnover is moderate for that company, at NIS 7.3 million.

Drug company

Agis Industries (TASE:

AGIS

) also stayed firm at a gain of 1.2% after ambling ahead in recent days. Turnover was almost NIS 2 million.

Chemicals were also in favor today, with

Israel Chemicals (TASE:

CHIM

) surging by 1.8% on hefty turnover of NIS 11.2 million, and

Makhteshim Agan Industries (TASE:

MAIN

) rising by 1.5%.

The Tel Aviv Stock Exchange announced that as a mark of respect and remembrance on the first anniversary of the September 11 tragedy in the United States, its staff will observe two minutes of silence at 3:46 p.m. Israel time on September 11.