Israeli forces moved into the fringes of Gaza City as families fled or remained hidden after a second night of combat.

Just before dawn two loud explosions were heard in Gaza City and shelling from naval boats off the coast could also be heard.

There were also reports of artillery from Israel and navy gunboats shelling the two main north-south roads at points in central and southern Gaza.

The Israeli air force attacked 130 targets in Gaza overnight, a spokesman said.

At least 70 Palestinians have been killed since Israel sent ground troops into Gaza on Saturday night, Gaza medics said.

Israel said one soldier was killed by a mortar shell on Sunday and another 19 were wounded, bringing the total to 49 since the beginning of the incursion.

Witnesses said tanks had cut off Gaza City and the far north from the rest of the strip, which would prevent the entry of arms, supplies and fighters from the south.

An AFP photographer said warplanes were also bombing targets in the southern border town of Rafah, where hundreds of tunnels are used to smuggle in supplies from Egypt.

The army declined to confirm or deny the reports.

Fierce clashes were also reported around the northern towns of Beit Lahiya, Beit Hanun and Jabaliya.

Moawiya Hassanein, head of Gaza medical emergency services, told AFP the number of Palestinians killed since the Israeli operation was launched on December 27 was now 512, including 87 children, with more tan 2,500 wounded.

Five members of the same family died when a tank shell hit their car near Gaza City, emergency services said.

Three ambulance workers were killed when they were hit by a missile as they helped wounded victims, medics said.

Aid groups said the offensive had aggravated a humanitarian crisis for the population, who have no electricity, no water and now face dire food shortages. Hospitals were only running on backup generators.

The Israeli government fought off international pressure over its biggest military operation since its 2006 war in Lebanon, with French President Nicolas Sarkozy due in the region, as well as Russian and EU delegations.

International efforts to halt the conflict sought new impetus after the UN Security Council failed to agree a statement on the conflict, with the United States giving strong backing to Israel.

France's Sarkozy was scheduled to meet Israeli Prime Minister Ehud Olmert in Jerusalem and Palestinian president Mahmud Abbas in Ramallah on Monday, after first meeting his Egyptian counterpart, Hosni Mubarak, in Cairo.

France hopes Egypt can rekindle its role as a mediator between Israel and Hamas.

Czech Foreign Minister Karel Schwarzenberg, whose country holds the rotating EU presidency, is heading a delegation to the Middle East, while Medvedev's Middle East envoy, Alexander Saltanov, was also on the way.

The European Union and Russia are both part of the Middle East diplomatic Quartet, along with the United Nations and the United States.

Israel unleashed "Operation Cast Lead" on December 27 with the declared aim of ending rocket attacks on Israel that resumed after a six-month truce ended on December 19.

Rocket fire over the past week has killed four people in Israel. Thirty-two rockets and mortar rounds were fired across the border on Sunday and hit Sderot, Ashdod and other towns, lightly injuring three people.

Israel believes Hamas may be seeking "a respectable" way out of the conflict having underestimated the scope of the military offensive, Social Affairs Minister Isaac Herzog said.

He told CNN television Hamas was under "huge pressure" from the military operation.

"The intelligence reports that we've received today in the Israeli cabinet are that the Hamas is looking for a respectable way of finding a way to get out of this situation," he said.

Israeli army spokesman Avi Benayahu told public television "Hamas has come to the conclusion that it has made an enormous strategic error by refusing to extend a ceasefire accord."

The Israeli offensive has sparked spiralling anger in the Muslim world and protests across the globe.

Israeli troops shot and killed a protester during a demonstration in the West Bank. Tens of thousands of Turks staged an anti-Israeli rally in Istanbul.

The UN Security Council failed to agree a statement calling for a ceasefire in closed-door consultations late on Saturday.

That drew expressions of regret from UN chief Ban Ki-moon on Sunday, who said he would be working with key players to facilitate a consensus to bring about an end to the violence.

Hamas spokesman Fawzi Barhum condemned the Security Council action as "a farce" dominated by the United States, which has strongly supported Israel.

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