Washington promised security guarantees on Thursday that could bring a deal to reach a ceasefire between Israel and Hamas closer as Israel unleashed its heaviest shelling of Gaza neighborhoods in what might be a final push against Hamas, killing an senior leader.
According to Egyptian officials, an Israeli delegation responded favorably during a meeting to proposals for an end to war in Hamas-controlled Gaza Strip, but there will have to be further talks.
Israel responded by saying no decision has yet been reached as its envoy Amos Gilad headed back to Jerusalem after four hours of talks with intelligence chief Omar Suleiman, Egypt's point man on Israeli and Palestinian affairs.
Hamas official Ayman Taha called the street warfare, in which Israeli shells struck a U.N. compound and a media building, an attempt to force the group to accept Israel's terms for a truce. A hospital was also hit the fighting.
One of Hamas's senior leaders in Gaza, interior minister Said Siam, was killed in an Israeli air strike in Gaza on Thursday evening.
A senior Western diplomat said Israel appeared to be trying to make last-minute gains on the ground before a truce could be imposed.
"It's a classic Israeli strategy," the diplomat said.
Another Hamas official said Wednesday that the movement had accepted "broad outlines" of the Egyptian plan without approving it outright.
Washington ready to offer guarantees
Addressing a main Israeli concern, U.S. Secretary of State Condoleezza Rice told Prime Minister Ehud Olmert that Washington is ready to offer Israel guarantees to prevent arms smuggling into Gaza, a key Israeli demand for ending its war on Hamas, Olmert's office said.
"The secretary of state noted that the United States would be prepared to assist in solving the issue of smuggling and to sign a memorandum of understanding with Israel on the subject," Olmert's bureau said in a statement.
Israel has said that a ceasefire must ensure that Hamas can no longer smuggle in weapons through tunnels under the Gaza-Egypt border as well as end the group's rocket attacks on its southern towns.
Hamas wants Israel, which launched its Gaza offensive on Dec. 27, to withdraw its troops and lift a long-standing blockade on the Gaza Strip.
With Israeli troops edging closer to the heart of the city of Gaza, international organizations have expressed growing concern about the plight of civilians trapped there.
Human rights groups have reported shortages of vital supplies, including water, in the Hamas-ruled territory. A fuel shortage has brought frequent power blackouts.
Human Rights Watch said Israel's daily three-hour break in attacks to facilitate the supply of humanitarian aid to Gazans was "woefully insufficient."
More than half the Gaza Strip's 1.5 million people are dependent on the U.N. food aid. The U.N. has been working in Gaza since 1948, when tens of thousands of Palestinian refugees fled to the area to escape attacks during the war that accompanied Israel's founding.
Hoping for developments
Palestinian president Mahmoud Abbas told reporters in Ramallah on Thursday that he hopes for developments on a ceasefire in the next few hours.
Egyptian Foreign Minister Ahmed Abul Gheit has said the plan launched by his President Hosni Mubarak on Jan. 6 calls for an "immediate ceasefire and acceptance of withdrawal" of Israeli forces from the Gaza Strip.
Israel says Egypt does not do enough to combat the smuggling tunnels, while Egypt has rejected the presence of a foreign force on its territory.
In talks in Washington and Cairo, Israeli officials have said they wanted security guarantees to fall under an American "umbrella" and include Egyptian acceptance of U.S. and European advisers and technology to help combat smuggling through the border tunnels, diplomats said.
In addition to bolstering security along the so-called Philadelphi corridor that separates Gaza from Egypt, Israel has demanded an international maritime monitoring program to track and halt vessels with rockets that could help Hamas regroup.
Dozens of terrified residents of neighborhoods near the Gaza city centre were seen fleeing on foot.
Thousands more huddled in homes that provided precarious shelter while explosions tore through rubble-strewn streets clouded by smoke.
"It is a catastrophe," one woman said, walking quickly away from the area and carrying a child in her arms as two other children ran behind her to keep up.
"We took our money and passports. We have to carry some identification with us in case we get killed," she said. "Hamas can claim victory if it wants but we just need this bloodshed to end."
The U.N. said on Wednesday it was allocating $7 million from an emergency fund to help provide food and clean water in Gaza.
Holmes said in a statement that people in Gaza had no access to running water.
The U.N. children's agency, UNICEF, said more than 355 children had been killed and more than 1,500 wounded in Gaza.
"Beyond the immediate needs of the children who have lost their homes, have no access to water, electricity and medicine, beyond the horrific physical scars and injuries however, are the deeper psychological wounds of these children," UNICEF Executive Director Ann Veneman said in a statement.