"To strike terror" basically means "to terrify or to make (somebody) very afraid or to frighten".
bandit = violent robber or outlaw
"Bandits strike terror" thus means (for example):
Outlaws make people very afraid
Violent robbers terrify people
"We are not wholly bad or good, who live our lives under Milk Wood"
prayer of the Reverend Eli Jenkins in Under Milk Wood by Dylan Thomas