Israel said it recaptured Gaza border areas from Hamas militants on Tuesday, the fourth day of fierce fighting that has left thousands dead on both sides since the Islamists launched a surprise attack.
Prime Minister Benjamin Netanyahu has warned Israel's military campaign following Saturday's onslaught is only the start of a sustained war to destroy Hamas and "change the Middle East".
Fears of a regional conflagration have surged ahead of an expected Israeli ground incursion into Gaza, the crowded, impoverished enclave from where Hamas launched its land, air and sea attack on the Jewish Sabbath.
The death toll in Israel has surged above 900 from the worst attack in the country's 75-year history, while Gaza officials have also reported 900 people killed so far, and Israel's army said the bodies of roughly 1,500 militants had been found.
Hamas gunmen killed more than 100 people in the kibbutz of Beeri alone, said Moti Bukjin, a volunteer with the charity Zaka that recovers bodies in accordance with Jewish law.
A day after his ally Netanyahu called Hamas "savages," United States President Joe Biden condemned the Hamas attacks as "sheer evil."
The Ezzedine al-Qassam Brigades, Hamas's armed wing, began its operation saying it aimed to "end all the crimes of the occupation (Israel). Their time for rampaging without being held accountable is over."
Netanyahu, the veteran leader at the helm of Israel's hard-right coalition, has called for an "emergency government of national unity" after his administration's proposal for judicial reforms split the nation and even its military this year, before the war brought the nation closer together.
The Israeli army has called up 300,000 reservists and massed tanks and other heavy armour both near Gaza and on the northern border with Lebanon, where exchanges of fire continued.
The military said its forces had largely reclaimed the embattled south and the border around Gaza, and dislodged holdout Hamas fighters from more than a dozen towns and kibbutzim.
"Around 1,500 bodies of Hamas (fighters) have been found in Israel around the Gaza Strip," said army spokesman Richard Hecht, adding security forces had "more or less restored control over the border" with the enclave.
In Kfar Aza kibbutz, where Israeli forces say Hamas massacred more than 100 civilians, Israeli soldiers prepared to remove several of their compatriots in black body bags.
- 'Blackmail' -
In a speech on Tuesday Biden confirmed at least 14 Americans were killed, and others were missing.
Washington, which has sent additional military aid to Israel in response to the attacks, said it was taking seriously Hamas threats to execute hostages.
Relatives of Americans believed held in Gaza called on the Biden administration to bring them home safely.
Western powers and many other nations have reported citizens killed, abducted or missing. These include: Brazil, Cambodia, Canada, Ireland, Mexico, Nepal, Panama, Paraguay, Russia, Sri Lanka, Thailand and Ukraine.
Hamas has held around 150 captives since its ground incursion, among them children, elderly and young people captured at a music festival where around 270 died.
On Monday, Hamas warned it would start killing hostages every time Israel launches a strike on a civilian target in Gaza without warning. French President Emmanuel Macron called the threat "unacceptable blackmail."
Fear and chaos reigned among the 2.3 million Palestinians living in the coastal territory that has been hammered by thousands of Israeli munitions.
Hamas said the strikes killed two of its senior figures: Zakaria Muammar led its economics section, and Jawad Abu Shamala coordinated ties with other Palestinian factions.
Israel's army also announced their deaths.
Four Palestinian journalists were also killed in Israeli air strikes on Gaza City, media unions and officials said.
Explosions again shook Gaza City on Tuesday night.
Earlier, for the third time in 24 hours, an Israeli air strike hit Gaza's Rafah border crossing with Egypt, an AFP photographer and an NGO said.
White smoke billowed from among fishing boats after an air strike on Gaza's port.
Late Tuesday a new barrage of rockets was fired from Gaza towards the Israeli city of Ashkelon.
The deserted streets of Jerusalem were also targeted by Hamas rocket fire.
"Israeli people they are scared of the Arabs and the Arabs are scared of the Jews... everybody is scared of each other," said Ahmed Karkash, a shop owner in the Old City.
In Gaza City, entire blocks have been reduced to rubble.
One resident, Muhammad Najib, 70, said he fled his home Monday after receiving an Israeli warning to evacuate. He returned on Tuesday to find the area "devastated, a large number of houses were completely destroyed."
Najib asked: "What is the fault of the children and the women?"
Israel on Monday imposed a total siege on Gaza, which it has already blockaded for years, cutting off the water supply, food, electricity and other essential supplies.
European Union foreign ministers urged Israel not to cut such essentials, and called for humanitarian corridors for those trying to flee.
UN human rights chief Volker Turk said such sieges are prohibited under international humanitarian law.
Medical supplies, including oxygen, were running low at Gaza's overwhelmed Al-Shifa hospital, said Mohammed Ghonim, a doctor in the overwhelmed emergency room.
- Taken 'by surprise' -
The United Nations said more than 187,500 people had been displaced inside the Gaza Strip, with most taking shelter in UN schools.
Israel has been left reeling by Hamas's unprecedented ground, air and sea assault that began with thousands of rockets, likening it to the 9/11 attacks on the US.
In the aftermath, soldiers who were on guard duty along the hi-tech security barrier around Gaza recounted how the attack began with an effort to cripple observation cameras and communications.
"They took us by surprise and we weren't ready for it... and (there was) no intelligence at all," a lookout soldier said in testimony posted on Instagram.
Israel faced the threat of a multi-front war after three days of clashes with militants on the northern border with Lebanon
Mourners in the southern Lebanese village of Khirbet Selm carried two caskets, draped in yellow Hezbollah flags, with the bodies of two fighters it said were killed in Israeli strikes a day earlier. A third fighter was also killed, the Iran-backed Hezbollah movement said.
On Tuesday, the Ezzedine al-Qassam Brigades claimed a fresh salvo of rocket fire from south Lebanon towards Israel, the Israeli army said, adding it retaliated with artillery fire.
"It's like a state of war," said Yaakov Regev, sipping coffee at a petrol station in northern Israel, a few kilometres from the Lebanon border.
Unrest has also surged in the Israeli-occupied West Bank, where 15 Palestinians have been killed since Saturday.