Kerry: Progress in Gaza truce talks
Israeli troops battled Hamas militants near a southern Gaza Strip town as the senior US diplomat reported progress in efforts to broker a truce in a war that has so far killed at least 684 Palestinians and 31 Israelis.
But neither side appeared close to backing down after Palestinian rocket fire led several international airlines to cancel flights to Tel Aviv and Israeli troops clashed with Hamas fighters near the town of Khan Younis, forcing dozens of families to flee.
Israel has insisted it must substantially curb the military capabilities of the Islamic militant group Hamas - a position that appears to have gained support within the US administration - while Hamas has demanded the lifting of a crippling Israeli and Egyptian blockade on the impoverished coastal territory.
US secretary of state John Kerry flew into Tel Aviv despite a US ban on flights after a Hamas rocket hit near the airport the day before, reflecting his determination to achieve a ceasefire agreement between the warring sides.
He is due to meet Israeli prime minister Benjamin Netanyahu after earlier meetings with Palestinian president Mahmoud Abbas and UN chief Ban Ki-moon, but US officials have downplayed expectations for an immediate, lasting truce.
In Jerusalem, Mr Kerry said negotiations towards a ceasefire agreement were making some progress, describing unspecified steps forward in the negotiations as he met Mr Ban for a second time this week.
"We certainly have made steps forward," Kerry said, adding: "There's still work to be done."
White House deputy national security adviser Tony Blinken said Hamas must be denied the ability to "rain down rockets on Israeli civilians".
"One of the results, one would hope, of a ceasefire would be some form of demilitarisation so that this doesn't continue, doesn't repeat itself. That needs to be the end result."
On the ground Israeli troops backed by tanks and aerial drones clashed with Hamas fighters armed with rocket-propelled grenades and assault rifles on the outskirts of Khan Younis, killing at least eight militants, according to a Palestinian health official.
The Palestinian Red Crescent was trying to evacuate 250 people from the area, which was being pummelled by air strikes and tank shelling.
Hundreds of residents were seen fleeing their homes as the battle unfolded, flooding into the streets with what few belongings they could carry, many with children in tow. They said they were seeking shelter in nearby UN schools.
Meanwhile, a foreign worker in Israel was killed when a rocket fired from the Gaza Strip landed near the southern city of Ashkelon, police said.
Israel also reported that two more of its soldiers had died, bringing the military's death toll to 29. Two Israeli civilians have been killed in 15 days of fighting.
Further north, in the Shijaiyah neighborhood of Gaza City, which saw intense fighting earlier this week, an air strike demolished a home, killing 30-year-old journalist Abdul Rahman Abu Hean, his grandfather Hassan and his nephew Osama.
The Palestinians say Israel is randomly deploying a wide array of modern weaponry against Gaza's 1.7 million people, inflicting a heavy civilian death toll and levelling entire buildings.
Israel says it began the Gaza operation to halt Hamas rocket fire into Israel - more than 2,100 have been fired since the conflict erupted - and to destroy a network of cross-border tunnels, some of which have been used to stage attacks inside Israel.
As the Gaza death toll mounted, a 34-year-old Palestinian man was killed in clashes with Israeli soldiers near the West Bank city of Bethlehem, doctors said, a potentially ominous development in an area that has so far been relatively quiet.