Israeli air strikes flattened Hamas government buildings in the Gaza Strip and targeted leaders of Gaza's Islamist groups yesterday, the third day of its fiercest offensive against the Palestinians in four decades.
The toll from the onslaught rose to 327 dead and around 700 wounded, Palestinian medical officials said. The UN said at least 57 of the dead were civilians.
"We have an all-out war against Hamas and its kind," Israeli Defence Minister Ehud Barak told parliament, using a term he has employed in the past to describe a long-term struggle against Israel's Islamist enemies.
Broadening their targets to include the Hamas government in the Gaza Strip, Israeli warplanes bombed the Interior Ministry, which supervises 13,000 members of the group's security forces. The building had been evacuated and there were no casualties.
The planes also attacked the homes of two top commanders in Hamas's armed wing. They were not home, but several family members were among the seven dead.
Israeli military commentators said in media reports that the army was reinforcing its ground forces near Gaza after darkness fell, for a possible ground incursion.
Hamas, an Islamist movement that took over the Gaza Strip in 2007, defied the Israeli assaults, the fiercest in the coastal territory since the 1967 Middle East war.
Its militants fired a salvo of rockets into the Israeli city of Ashkelon, killing one person, the second such fatality since the Israeli aerial campaign began on Saturday.
Rocket fire from Gaza at Israel intensified immediately after Hamas declared the end of a truce on December 19.
With six weeks to go to an election that polls suggest the more hawkish right-wing Likud party will win, Israel's centrist government says the offensive aims to put a stop to the rockets.
Israel declared areas around the Gaza Strip a "closed military zone", citing the risk from Palestinian rockets, and ordered out journalists observing a build-up of armoured forces.
Excluding the press could help Israel conceal preparations for a ground incursion following three days of air strikes that have caused chaos, turned buildings to rubble and left hospitals struggling to cope.
Wounded Gazans trickled one by one into Egypt and 10 trucks carrying medical supplies were allowed to cross into the blockaded territory. Border officials said about 30 Palestinians were expected to leave for treatment.
The United Nations Relief and Works Agency said its visits to hospitals and medical centres had produced a "conservative" figure of at least 57 civilian dead.
Israeli markets largely shrugged off the conflict, and stock indices rose 0.7 to 0.9 per cent yesterday, after losing 1.5 per cent on Sunday, the day after the attacks on Gaza began.
Oil prices rose above $40 a barrel yesterday, boosted by the weak dollar and the Gaza violence, which served as a reminder of tensions that could threaten crude supplies from the region.
Most Gazans in the enclave of 1.5 million people, one of the most densely populated areas on earth, stayed at home, in rooms away from windows that could shatter in blasts from air strikes on Hamas facilities. Residents of southern Israel ran for shelter at the sound of alarms heralding incoming rockets.
In Khan Younis in the southern Gaza Strip, an air strike killed a local commander of Islamic Jihad, three other members of the militant group and a child as they stood in the street, medical workers said. Islamic Jihad said the commander was wanted by Israel.
Israeli aircraft also destroyed a laboratory building at the Islamic University, a significant cultural symbol in Gaza.
Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert, said the offensive would go on until the population in southern Israel "no longer live in terror and in fear of constant rocket barrages".
"(The operation could) take many days," said military spokesman Avi Benayahu.
Hamas spokesman Fawzi Barhoum has urged Palestinian groups to use "all available means" against Israel, including martyrdom operations" - meaning suicide bombings.
The Gaza operation and civilian casualties have enraged Arabs across the Middle East.
Protesters burned Israeli and US flags to press for a stronger response from their leaders.
Palestinian President Mahmoud Abbas, whose writ runs only in the West Bank since his Fatah faction was ousted from Gaza by Hamas last year, had urged Hamas not to end its truce and has effectively accused it of bringing the onslaught on itself.
Nevertheless, Ahmed Qurie, Abbas's chief negotiator, yesterday said that the Palestinians had put US-backed peace talks with Israel, which have anyway made little progress, on hold.
UN Secretary-General Ban Ki-moon demanded world leaders "use all possible means to end the violence" and "act swiftly and decisively to bring an early end to this impasse".
But US President George W. Bush's administration, in its final weeks in office, demanded Hamas agree to a ceasefire. White House spokesman Gordon Johndroe said the US "understands that Israel needs to take actions to defend itself".
Egyptian Foreign Minister Ahmed Aboul Gheit said during a visit to Turkey that "Israel must stop its killing operations against Palestinians". He called for an immediate ceasefire.