WASHINGTON (Reuters) - The White House said on Monday it was "deeply troubled" by Israel's assassination of Hamas leader Sheikh Ahmed Yassin and urged Jerusalem to show restraint after initially declining to condemn the attack.

White House spokesman Scott McClellan told a televised briefing that Washington had no advance word before the attack on Yassin, and said "Israel has the right to defend herself" against the "terrorist" group.

Similar statements in the past have been interpreted as a green light for further action by Israel.

But in off-camera comments just minutes later, McClellan revised the White House position by adding, "We are deeply troubled by this morning's actions in Gaza." It was the first direct criticism from the White House, which had initially avoided explicitly condemning or condoning the assassination.

The killing of Yassin, which prompted threats of reprisal from Hamas against Israel and the United States, is a major setback to the stalled U.S. "road map" to Middle East peace, already mired in tit-for-tat violence.

Analysts warned that Hamas may target Israeli political leaders in retaliation. "It's clearly escalatory in nature. What I expect is more bloodshed on both sides," said Shibley Telhami, a Middle East expert at the Brookings Institution.

The White House said it sees Israeli Prime Minister Ariel Sharon's plan to unilaterally remove Israeli settlements in the Gaza Strip as a "positive" and potentially "historic" interim step while the road map remains stalled.

"All parties should exercise restraint and do everything possible to avoid any further actions that make it more difficult to restore calm in the region," McClellan said.

But he put the onus on the Palestinian Authority to "do everything it can to confront and dismantle terrorist organizations."

Israeli Foreign Minister Silvan Shalom briefed Vice President Dick Cheney hours after the military strike and told reporters that Washington was not involved in the decision.

"We are doing everything we can to coordinate our future moves with the American administration, but it didn't include this action that was taken in Gaza," Shalom said at the White House. "Israel decided to take this decision by its own government."

President Bush's national security adviser, Condoleezza Rice, also insisted that Washington was given no prior warning of the attack.

CHANCE OF A "BETTER DAY?"

Despite the setback, the White House said it has not given up on peace talks.

"There is always a possibility of a better day in the Middle East and some of the things being talked about by the Israelis -- about disengagement from areas -- might provide new opportunities," Rice told NBC's "Today" show.

"I would hope that nothing will be done to preclude those new opportunities from emerging."

Shalom said Sharon is expected to visit the United States next month -- either April 1 or April 14 -- for talks with Bush expected to focus on Israeli plans for the Gaza settlements.

Bush is also set to meet with Egyptian President Hosni Mubarak next month to discuss the road map at the president's ranch in Crawford, Texas.

In an interview with CNN, Shalom denied the assassination was an effort to appease hard-liners in the Israeli Cabinet who oppose Sharon's plan to withdraw the Gaza settlements.

He said Israel had no plans to assassinate Palestinian President Yasser Arafat, as had been suggested by some Palestinians, adding that the focus was on the leaders of Hamas and Islamic Jihad.

Shalom justified the attack as necessary to protect Israelis from Yassin, whom he called "the godfather of the suicide bombers."

The assassination could help deter other militant leaders by delivering the message that "they will pay for their crimes, they will pay for the instructions that they are giving to these suicide bombers," he said.