Annan's comment came as he arrived in Syria to meet with President Bashar Assad and opposition leaders.
"I have come to Syria at a critical moment in this crisis," Annan said. "I am personally shocked and horrified by the tragic incident in Houla two days ago, which took so many innocent lives, children, women and men."
Annan called on the Syrian government to "take bold steps to signal that it is serious in its intention to resolve this crisis peacefully, and for everyone involved to help create the right context for a credible political process."
He said the "message of peace is not only for the government, but for everyone with a gun."
Merchants in Syria's main market, the Hamidiyeh Souk, carried out a general strike Monday to protest the massacre at Houla last week, the Los Angeles Times reported.
Citing activists and witnesses, the newspaper said the strike -- the first since the March 2011 uprising -- spread to other sections of the Syrian capital.
One activist said "security forces are going insane" with the stores closed for business, the newspaper reported.
The Syrian Observatory for Human Rights, which supports the opposition to Assad, said Syrian forces were "forcing merchants to open their shops."
British Foreign Secretary William Hague and Russian Foreign Minister Sergey Lavrov met Monday in Moscow to discuss the possibility that Russia would pressure the Syrian regime to comply with Annan's peace plan, CNN reported.
Hague said Russia had a special role in pressuring the Syrian government to implement Annan's plan, while acknowledging some differences over Syria, The New York Times reported.
"The absolute urgent priority is to have the Annan plan implemented," particularly a political dialogue, Hague said during a joint news conference with Lavrov.
"It is not the most important thing who is in power in Syria, what regime has power," said the Russian foreign minister. "For us, the main thing is to put an end to the violence among civilians and to provide for political dialogue under which the Syrians themselves decide on the sovereignty of their country."
Without naming any countries, he said immediate neighbors of Syria who oppose the regime were not helping the situation by pushing regime change.
"We do exert pressure on the Syrian government daily," Lavrov said, adding he expected supporters of the opposition to do the same in pushing them toward a political solution.
After the massacre in Houla, rebel leaders again asked international leaders for airstrikes against regime forces. U.N. monitors -- in Syria to observe the implementation of a cease-fire that is part of the peace plan -- said 49 children were among the 108 people killed Friday in Houla, a suburb of Homs, an anti-government hotbed.
Opposition activists and residents blame Assad's regime for the bloodbath, while government officials blamed terrorists. Rebel leaders say Annan's peace plan, shaky ever since it was implemented in April, is "dead" following the attack in Houla.
The massacre reignited international anger against Assad's regime for its violent crackdown on pro-democracy protesters since March 2011.
The U.N. Security Council Sunday unanimously condemned the Syrian government for its role in the massacre as new details from international observers seemed to prompt rare Russian cooperation in criticizing Syria, its ally and trading partner, The New York Times reported.
While not directly blaming the Assad government for the deaths, the Security Council rebuked it for using tanks and artillery against civilians despite agreeing to the April 12 cease-fire.
"The evidence is clear -- it is not murky," German envoy Peter Wittig said after the meeting. "There is a clear government footprint in those killings."
The Syrian Network for Human Rights issued a report documenting another attack by the regime in Hama Friday, in which 33 people -- including seven children -- died and more than 90 people were wounded.
The rights network said Syrian troops marched on Hama after the slaughter at Houla.
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