Israel formed an emergency unity government on Wednesday as it pounded Gaza to root out Hamas and deployed forces north of the densely populated Palestinian enclave, where the militants said they were still fighting after their cross-border assault.
Prime Minister Benjamin Netanyahu agreed to form a war cabinet with former defence minister and centrist opposition party leader Benny Gantz and focus entirely on the conflict, a joint statement from Gantz's National Unity party said.
US President Joe Biden condemned the surprise weekend attack on populated areas of southern Israel by hundreds of Hamas gunmen as "sheer evil", and he issued a warning seemingly aimed at its Iranian supporters.
Israel's death toll rose to 1,200 with over 2,700 wounded, its military said, from the militants' hours-long rampage after breaching the border fence enclosing Gaza on Saturday.
The group's armed wing, the Al Qassam Brigades, said it was still fighting inside Israel on Wednesday. Israel deployed tanks and armoured vehicles just north of Gaza where the clashes were reported, but had no immediate comment on the Hamas claim.
Retaliatory strikes on the blockaded enclave have killed 1,055 people and wounded 5,184, with some 535 residential buildings destroyed leaving around 250,000 homeless, Gaza's Hamas authorities said. Most of the displaced were in UN-designated shelters, others huddling in shattered streets.
Israel has vowed swift punishment for the deadliest Palestinian militant attack in its 75-year history, which left corpses strewn around a music festival and a kibbutz community.
The military said dozens of its fighter jets struck more than 200 targets in a neighbourhood of Gaza City overnight that it said had been used by Hamas to launch its attacks.
"We started the offensive from the air, later on we will also come from the ground," Defence Minister Yoav Gallant told soldiers near the fence on Tuesday.
Israel has put Gaza under "total siege" to stop food and fuel reaching the enclave of 2.3 million people, many poor and dependent on aid. Hamas media said on Wednesday electricity went out after the only power station stopped working.
With Palestinian rescue workers overwhelmed, others in the crowded coastal strip joined the search for bodies in rubble.
"I was sleeping here when the house collapsed on top of me," one man cried as he and others used flashlights on the stairs of a building hit by missiles to find anyone trapped.
The Israeli military said its troops had killed at least 1,000 Palestinian gunmen who infiltrated from Gaza and the Chief of the General Staff met commanders to discuss their next steps.
"Wherever there are Hamas leaders - the IDF strikes with precision and power," it said, referring to Israel's military.
WEST BANK VIOLENCE
Scores of Israelis and others from abroad were taken to Gaza as hostages, some of whom were paraded through streets. Both sides have said many women and children were among the dead and wounded, and distraught relatives have held multiple funerals.
Israel said it was shifting schools to remote learning from Sunday and issuing more firearms to licensed citizens, predicting possible friction between its majority Jews and Arab minority amid calls for more protests in support of Gaza.
In the Israeli-occupied West Bank, the acting Palestinian governor of Nablus, Ghassan Daghlas, said Palestinians were shot at and reportedly wounded by Israeli settlers. Reuters could not immediately verify the report and there was no immediate Israeli comment. An Israeli hospital in Ashkelon north of Gaza said it had been hit by a rocket but no casualties were reported.
In another sign of the crisis widening, Israeli shelling hit southern Lebanese towns after a rocket attack by the powerful armed group Hezbollah, which is backed by Iran. It was the fourth consecutive day of violence there and followed shelling from Syria on Tuesday that Israel said it was investigating.
A ground offensive carries risks for Israel, notably to the hostages held in the narrow, widely urbanised Gaza Strip that is tightly ruled by Hamas. It has threatened to execute a captive for each home hit without warning.
Palestinian sources said one of the homes Israeli air strikes hit in Gaza overnight killed three relatives of Hamas military wing chief Mohammed Deif, the secretive mastermind of the assault, which was planned for two years.
Israel withdrew settlers and troops from Gaza in 2005 after 38 years of occupation. An Israeli blockade since Hamas seized power in the enclave in 2007 has created conditions which Palestinians say are intolerable.
Washington said it was talking with Israel and Egypt about safe passage for civilians from Gaza, with food in short supply.
Hussein Al-Sheikh, an official in the West Bank-based Palestinian Authority, said the international community must intervene urgently to avert "a major humanitarian catastrophe".
INTERNATIONAL REACTION
Biden called the Hamas attacks "an act of sheer evil" and said Washington was rushing military assistance to Israel, including to replenish its Iron Dome aerial defence system.
He urged Israel to avoid causing civilian casualties and said the US had strengthened its presence in the region by moving an aircraft carrier strike group and fighter aircraft.
"Let me say again to any country, any organization, anyone thinking of taking advantage of the situation, I have one word: don't," said Biden, in an assumed reference to Iran and its proxies.
US officials say they do not have evidence Iran orchestrated the attacks, but point to the Islamic Republic's long-term support for Hamas.
'WE HAVE DONE NOTHING'
Wounded Gaza Palestinian Ala al-Kafarneh said he had lost eight family members when they were caught by an Israeli attack after fleeing two others. "We have done nothing," he said.
The Palestinian Foreign Ministry said Israeli strikes had destroyed more than 22,600 residential units and 10 health facilities and damaged 48 schools.
Palestinian UN envoy Riyad Mansour wrote to the UN Security Council accusing Israel of war crimes.
Violence also flared in Arab East Jerusalem and in the West Bank, where officials say 21 Palestinians have been killed and 130 injured in clashes with Israeli forces since Saturday.
