The flag of Shi’a terrorist organization flies alongside the Lebanese and Palestinian flags on Lebanon’s border with Israel. Photo: Reuters / Ali Hashisho.

Israel accused Hezbollah on Tuesday of setting up a factory for precision-guided missiles in Lebanon’s Bekaa Valley, in a veiled warning of further possible Israeli counter-strikes after a drone attack near Beirut set off brief cross-border fighting.

Sunday’s shelling exchange was the fiercest between Israel and Hezbollah since the 2006 Lebanon war. While neither is keen to escalate, Israel has said it could act against any upgrades of Hezbollah’s missile arsenal, while Hezbollah has said it would retaliate for attacks on Lebanese soil.

In a statement to media accompanied by satellite images, the Israeli military said that Hezbollah, with Iranian assistance, had been bringing specialized equipment to a weapons factory near the Bekaa village of al-Nabi Sheet with a view to setting up a production line for precision-guidance missiles.

Iran is trying to turn its proxy Hezbollah into the first terror group in the world with precision guided missiles.

We won’t let them. pic.twitter.com/0DIS7hkawd

— Israel Defense Forces (@IDF) September 3, 2019

Hezbollah recently moved some of the equipment to “civilian locations” in Beirut as a precaution against strikes, the Israeli military statement said, alluding to tensions that surged after the Aug. 25 drone incident in Beirut’s suburbs.

There was no immediate comment from Hezbollah, which has denied having precision-guided missile production sites in Lebanon. But it says it possess such weapons, which could be used to home in on and knock out key Israeli infrastructure.

In an Aug. 31 speech, Hezbollah leader Hassan Nasrallah accused Israel of using the movement’s capability with precision-guided missiles as a pretext for attacks.

Israel has not formally claimed responsibility for the Beirut drone strike, which a regional security source said hit a component of the precision-guided missile project.

Hoping to move Beirut to rein in Hezbollah, Israel has signaled that in any further flare-up it could carry out widespread attacks on Lebanon.