Does Israel have a right to defend itself?

Okay, Israel and the Palestinians had a truce along the Gaza Strip, the truce ended and a Palestinian terrorist group -- Hammas -- starts lobbing in mortars and missiles into Jewish settlements. Many Jews are killed, Israel demands that Hammas stop their reign of terror and, of course, Hammas responds by sending in more missiles and killing more people, So now Israel takes steps to defend itself and the Arab world counters with mive demonstrations against both Israel and the US. Someone please tell me what's wrong with this picture; since when can't a country defend itself against terrorism? What should Israel have done?