Thousands Flee Guns and Shells As Israel Tightens Grip on Gaza

Israeli tanks and troops seized control of large parts of the Gaza Strip yesterday, forcing tens of thousands of people to flee their homes as relentless artillery and gunfire killed at least 40 more civilians, including children. Some were killed when an Israeli shell hit Gaza City's central market.

Last night heavy fighting was reported in northern Gaza at Jabalya; just east of Gaza City in a district called Zeitoun; in the area of the former Jewish settlement of Netzarim, south of Gaza City; and in the middle of the Gaza Strip. There were reports that Gaza City was surrounded by Israeli troops.

The territory, home to 1.5 million Palestinians - more than half of whom are children - has effectively been divided south of Gaza City by the troops, who in some places have reached as far as the Mediterranean. There were also reports of a further division by Israeli troops to the north. Israeli forces were seen in southern Gaza, near the town of Rafah, along the Egyptian border.

Palestinians flooded in to the heart of Gaza City in the hope of finding shelter as Israeli forces fought Hamas in northern Gaza. But they faced a long and fearful night in darkness, lit only by the explosion of Israeli shells and flares, after Israel cut electricity to the enclave. The UN said all hospitals in the city, straining to deal with hundreds of wounded Palestinians over the past few days, had been without mains electricity for 48 hours and were depending on back-up generators, which were close to failing.

As the Palestinian death toll rose past 500 yesterday, there were growing international calls for a ceasefire, including from Gordon Brown. But with Hamas continuing to fire more than 30 rockets out of Gaza yesterday, Israel remained to determined to press ahead with its military campaign.

One Israeli soldier was killed near Jabalya in the first hours of the invasion. A further 32 were injured. A total of five Israelis - three civilians and two soldiers - have been killed since last Saturday when the Israeli campaign began.

Ehud Olmert, the Israeli prime minister, said the ground invasion, which began on Saturday night and was the most serious fighting in Gaza for decades, was "unavoidable". Shimon Peres, the Israeli president, said Israel would not accept a ceasefire. "Hamas needs a real and serious lesson. They are now getting it," he told a US television network. "We shall not accept the idea that Hamas will continue to fire and we shall declare a ceasefire. It does not make any sense."

But as Israeli forces pushed into the towns of Beit Hanoun, Beit Lahiya and Jabalya in northern Gaza, the civilian toll among Palestinians rose rapidly. Five died when an Israeli artillery shell landed in Palestinian Square, a shopping center in central Gaza City; five more were killed outside a mosque in northern Gaza. The dead also included a Palestinian paramedic working for an Oxfam-funded organization after an ambulance was hit by an Israeli shell in Beit Lahiya. The paramedic was working for the Union of Health Work Committees. Another paramedic lost his foot and the ambulance driver was injured in the same incident. The paramedics were trying to help evacuate an injured person in the Beit Lahiya area, when the shell struck the ambulance, Oxfam said.

John Prideaux-Brune, Oxfam's country director for Israel and Palestine, speaking from Jerusalem, said: "The incident shows yet again that trying to fight a military campaign in the densely populated streets and alleys of the Gaza Strip will inevitably lead to civilian casualties."

The charity said the ground offensive is preventing urgently needed supplies of medicine, food, water, and fuel from reaching 1.5 million Palestinians. Prideaux-Brune said: "Hospitals in Gaza are overflowing with dead and wounded while facing severe shortages of essential medical supplies and spare parts."

With more than 2,300 Palestinians injured, Hamas warned Israel of more battles to come. "You entered like rats. Your entry to Gaza won't be easy. Gaza will be a graveyard for you, God willing," Ismail Radwan, a Hamas spokesman said on the group's television station.

Israel's long-term intentions are still unclear: these incursions may end within days, or they may be the prelude to a longer military reoccupation.

Further evidence of the humanitarian crisis was provided by Gisha, an Israeli human rights group, which said 75% of the territory's electricity had been cut off. Gaza's sole power plant has been closed since Monday because no industrial diesel has been allowed in.

Gisha said 48 of Gaza's 130 water wells were not working because of the electricity shortages, leaving more than 500,000 people cut off from their water supply.

Brigadier General Avi Benayahu, an Israeli military spokesman, said the military's goals for "phase two" of the campaign were: "To deal a heavy blow to the Hamas terror organization, to strengthen Israel's deterrence and to create a better security situation for those living around the Gaza Strip that will be maintained for the long term."

The decision to launch a ground offensive came after a late-night meeting between Olmert, Ehud Barak, the defence minister and Tzipi Livni, the foreign minister, which ran until 4am on Saturday. A security cabinet meeting then approved the operation.

Diplomacy to end the conflict appeared to falter. Late on Saturday night, the US blocked a UN security council statement calling for an immediate ceasefire.

Meanwhile Jiri Potuznik, a spokesman for the EU presidency held by the Czech Republic, said the ground invasion was a "defensive, not offensive, action". Condoleezza Rice, the US secretary of state, canceled a trip to China to make time for the Gaza crisis. Israel continued to bar journalists from entering Gaza.