"I am shocked and deeply distressed by the apparently deliberate targeting by Israeli Defence Forces of a UN observer post in southern Lebanon that has killed two UN military observers, with two more feared dead," Annan said from Rome.

The bomb made a direct hit on the building and shelter of the observer post in the town Khiyam near the eastern end of the border with Israel, said Milos Struger, spokesman for the UN peacekeeping force in Lebanon known as UNIFIL. Canada is not a member of UNIFIL.

The UN in Lebanon says the Israeli air force destroyed the observer post, in which four military observers were sheltering. It said the four, from Austria, Canada, China and Finland, had taken shelter in a bunker under the post after it was earlier shelled 14 times by Israeli artillery.

A rescue team was also shelled as it tried to clear the rubble.

Annan said the attack took place "despite personal assurances given to me by Prime Minister Ehud Olmert that UN positions would be spared Israeli fire."

The Israeli government expressed "deep regret".

"Israel sincerely regrets the tragic death of the U.N. personnel in south Lebanon," Israeli Foreign Ministry spokesman Mark Regev said.

However Daniel Ayalon, Israel's ambassador to the U.S., called Annan's reaction "deplorable." He retracted the Israeli apology and attempted to discredit the UN by saying the observers were caught in crossfire between Hezbollah and Israel.

Sincere indeed.