Updated Wednesday 6.51am - adds death toll
Israel said it recaptured Gaza border areas from Hamas militants as the war's death toll passed 3,000 on Tuesday, the fourth day of fierce fighting since the Islamists launched a surprise attack.
Prime Minister Benjamin Netanyahu has warned Israel's military campaign following Saturday's onslaught was only the start of a sustained war to destroy Hamas and "change the Middle East".
Fears of a regional conflagration have surged amid expectations of a looming Israeli ground incursion into Gaza, the crowded enclave from where Hamas launched its land, air and sea attack on the Jewish Sabbath.
The death toll in Israel has surged above 1,200 from the worst attack in the country's 75-year history, while Gaza officials have reported 765 people killed by Israeli bombing. Over 1500 were killed when they assaulted Israel on Saturday.
"The death toll is a staggering 1,200 dead Israelis," IDF spokesperson Lieutenant Colonel Jonathan Conricus said in a video message, adding that "the overwhelming majority of them" were civilians.
Hamas gunmen killed more than 100 people in the kibbutz of Beeri alone, said Moti Bukjin, a volunteer with the charity Zaka that recovers bodies in accordance with Jewish law.
"They shot everyone," he told AFP. "They murdered in cold blood children, babies, old people - everyone."
Netanyahu compared the large-scale slaughter of Israeli civilians to the atrocities committed by the Islamic State group, also known as ISIS, when they controlled vast swathes of Syria and Iraq.
"Hamas terrorists bound, burned and executed children," a seething Netanyahu said in a televised address to the grieving nation late Monday. "They are savages. Hamas is ISIS."
The veteran leader at the helm of Israel's hard-right coalition also called for an "emergency government of national unity" after years of political crisis and bitter societal divisions. The opposition appeared to agree.
The Israeli army has called up 300,000 reservists for its "Swords of Iron" campaign and massed tanks and other heavy armour both near Gaza and on the northern border with Lebanon.
The military said its forces had largely reclaimed the embattled south and the border around Gaza and dislodged holdout Hamas fighters from more than a dozen towns and kibbutzim.
"Around 1,500 bodies of Hamas (fighters) have been found in Israel around the Gaza Strip," said army spokesman Richard Hecht, adding security forces had "more or less restored control over the border" with the enclave.
Threat to kill hostages
Key ally the United States - which reported 11 of its own citizens killed, and 20 missing in the spiralling conflict - stressed its full support for Israel, as did Britain, France, Germany and Italy.
Their leaders said they "recognise the legitimate aspirations of the Palestinian people" but said Hamas "offers nothing for the Palestinian people other than more terror and bloodshed", in a joint statement.
The five Western powers and many other nations have reported citizens killed, abducted or missing, also including Brazil, Cambodia, Canada, Ireland, Mexico, Nepal, Panama, Paraguay, Russia, Sri Lanka, Thailand and Ukraine.
Hamas has held around 150 hostages since its ground incursion, among them children, elderly and young people who were captured at a music festival where some 270 died.
On Monday, Hamas warned it would start killing hostages every time Israel launches a strike on a civilian target in Gaza without warning.
Fear and chaos reigned among the 2.3 million Palestinians living in the crowded and impoverished coastal territory that has been hammered by thousands of Israeli bombs.
Fireballs repeatedly lit up Gaza City before dawn Tuesday as explosions shook the ground and sirens wailed.
A distraught man was seen carrying the shrouded body of a child in Khan Yunis, in the south of the enclave, where other remains were piled onto the back of pickup trucks.
There were similar scenes in the kibbutz of Kfar Aza, where Israeli soldiers carried away the dead in black body bags.
The tension was felt on the deserted streets of Jerusalem, after it was targeted by Hamas rocket fire.
"Israeli people they are scared of the Arabs and the Arabs are scared of the Jews... everybody is scared of each other," said Ahmed Karkash, a shop-owner in the Old City.
In Gaza City, aerial footage shot by AFP showed the scale of the destruction, with entire building blocks reduced to rubble.
One resident, Muhammad Najib, 70, said he fled his home Monday after receiving an Israeli warning to evacuate and returned on Tuesday to a "terrifying scene" in his Al-Rimal neighbourhood.
"The entire area was devastated, a large number of houses were completely destroyed," he said. "What is the fault of the children and the women?"
Four Palestinian journalists were killed in an Israeli air strikes on Gaza City, media unions and officials said.
Israel imposed a total siege on long-blockaded Gaza on Monday, cutting off the water supply, food, electricity and other essential supplies.
United Nations chief Antonio Guterres said he was "deeply distressed" by the siege announcement and warned Gaza's already dire humanitarian situation will now "only deteriorate exponentially".
UN human rights chief Volker Turk said Tuesday that imposing "sieges that endanger the lives of civilians by depriving them of goods essential for their survival is prohibited under international humanitarian law".
'ISIS-level savagery'
The United Nations said more than 187,500 people had been displaced inside the Gaza Strip, with most taking shelter in UN schools.
Israel has been left reeling by Hamas's unprecedented ground, air and sea assault, that has included thousands of rockets, likening it to the September 11, 2001 attacks.
The country, which has long prided itself on a hi-tech military and intelligence edge, has been shaken to the core after being blindsided by the massive attack.
Washington has pledged to send munitions and military equipment to back Israel and deployed an aircraft carrier group to the eastern Mediterranean.
The White House said there was no intention to put US boots on the ground, while also condemning the "ISIS-level savagery" of the Hamas attack.
Israel faced the threat of a multi-front war after two days of clashes on the northern border with Lebanon with militants from the Iran-backed Hezbollah movement.
Unrest has also surged in the occupied West Bank, where 15 Palestinians have been killed since Saturday.
Iran - which is openly committed to Israel's destruction - has praised the surprise attack by Hamas but repeatedly denied playing any role in it.
Global powers and regional governments including Egypt, Turkey and Gulf states have engaged in frantic diplomacy seeking to prevent any further escalation.
Saudi Arabia's de facto ruler Crown Prince Mohammed bin Salman told Palestinian president Mahmud Abbas that the kingdom was working to ensure the conflict does not spread across the region, state media said.