JERUSALEM, MAY 28 -- A pipe bomb exploded today in a large outdoor fruit and vegetable market crowded with Jewish shoppers, killing a 72-year-old man and injuring nine others in what Israeli officials said might have been an attempt to avenge a mass slaying of Arab workers last week.

After the midday explosion in the Mahane Yehuda market near western Jerusalem's downtown area, merchants attacked Arab workers as well as Western journalists who arrived at the scene. Police arrested about 40 Arabs in the area and stepped up patrols to prevent attacks, officials said.

Shimon Cohen, who was struck in the liver by shrapnel, died tonight during surgery, authorities said. Officials said seven of those injured remained hospitalized this evening. An Associated Press photographer was treated at a hospital after being beaten by merchants.

No one was immediately charged in the attack, but Israeli television reported that Islamic Jihad, a radical Palestinian group, had claimed responsibility. Another radical group, Fatah Uprising, also claimed responsibility in a statement given to Reuter, but the group's account of the incident appeared erroneous.

The blast followed by eight days an attack on Arab workers in a Tel Aviv suburb by an Israeli gunman, described by authorities as "deranged." Seven workers were killed and 11 wounded in the shooting, and at least 16 other Palestinians died in the next few days in clashes between protesters and Israeli troops in the occupied West Bank and Gaza Strip.

Officials said they had feared a retaliatory attack after last week's slayings, and an aide to acting Prime Minister Yitzhak Shamir said today's incident may have been timed to coincide with the opening of an Arab summit in Iraq.

"I think that whoever planted that bomb was signaling to those meeting in Baghdad," said Yossi Ben Aharon, Shamir's chief of cabinet.

Yossi Olmert, chief of the government press office, said that while it was not clear who was responsible, "there is no question that there is a belligerent atmosphere that has been inflamed in recent weeks in the Middle East, and this is the result."

He added, "This shows that terrorism is still going on in the region, and it should focus attention again on the question of terrorism."

Israeli officials have claimed for some time that groups connected to the Palestine Liberation Organization have continued to engage in terrorism despite the renunciation of such tactics by PLO Chairman Yasser Arafat.

Israeli sources made available a report today alleging that eight Palestinian suspects recently captured by security services had confessed to belonging to Arafat's Fatah movement and had said they were ordered to carry out terrorist attacks inside Israel. The planned attacks, most of which never occurred, purportedly included a car bombing in the downtown area of predominatly Jewish western Jerusalem.

East Jerusalem activist Faisal Husseini, who is considered a leading PLO spokesman here, condemned today's bombing. Husseini, one of eight Palestinian leaders who have been on a hunger strike since last week's shootings, reiterated his opposition to attacks on Israeli civilians.