Israel pressed its blistering assault on the Gazan city of Khan Yunis Thursday, with the Palestinian Islamist movement Hamas saying dozens were killed in heavy bombardment and urban combat.

The Israeli army says it has "encircled" Khan Yunis, the hometown of Hamas's Gaza chief Yahya Sinwar, accused of masterminding the October 7 attacks that sparked the war.

An AFP journalist said the bombardment of Khan Yunis was relentless, with strikes hitting every few minutes.

Hamas, which has ruled Gaza since 2007, reported fierce clashes in the centre and west of the city, where fighting has been inching closer to hospitals sheltering thousands of displaced people.

Its health ministry said at least 50 people were killed in Khan Yunis over the past 24 hours.

Israel's army said several militants were killed in "close-quarters combat" in the city, and that strikes also targeted militants in central and northern Gaza.

At Deir al-Balah in central Gaza, the scene of some of the heaviest fighting, AFPTV footage showed graves with the names of those buried scrawled on them in crayon amid debris-strewn streets and pockmarked buildings.

"Those look like graves, but they are not proper ones," said Ahmad Abdul Salam, a resident of the city's Al-Maghazi refugee camp. "We buried whole families, who were wiped out, inside these mass graves."

- 'Taken nothing with me' -

Palestinians were fleeing Khan Yunis any way they could, with belongings piled on cars, in donkey-drawn carts, on tractors and on foot.

"I don't know where I'm heading," said Mousa Abu Youssef, explaining he decided to leave the city after tanks opened fire close to him.

"I've taken nothing with me, no blankets, no sheets, no (tent) -- nothing at all."

The war erupted when Hamas and other militants from Gaza launched the unprecedented October 7 attacks on Israel which resulted in about 1,140 deaths, mostly civilians, according to an AFP tally of official Israeli figures.

Militants also seized 250 hostages, and Israel says around 132 remain in Gaza. That number includes the bodies of at least 28 dead hostages, according to an AFP tally based on Israeli figures.

Israel in response vowed to crush Hamas and launched a relentless military offensive that the Palestinian territory's health ministry says has killed at least 25,700 people, about 70 percent of them women and children.

- 'Utterly unacceptable' -

The United Nations said another 12 people were killed on Wednesday when two tank shells struck a UN building sheltering 800 people in Khan Yunis, updating its previous toll of nine dead.

On Thursday, the UN agency for Palestinian refugees (UNRWA) said the Israeli army had ordered people taking refuge at the site to leave by Friday afternoon.

Thomas White, the Gaza director of UNRWA, denounced "persistent attacks on civilian sites" in Khan Yunis as "utterly unacceptable".

Intense fighting near hospitals in Khan Yunis had "effectively encircled these facilities, leaving terrified staff, patients and displaced people trapped inside", he said in a statement.

Asked about the shelling, the Israeli army said "a thorough review of the operations of the forces in the vicinity is underway", adding it was examining the possibility that the strike was a "result of Hamas fire".

The Israeli military is the only force known to have tanks operating in the Gaza Strip.

The government of Israeli Prime Minister Benjamin Netanyahu has faced mounting calls for a ceasefire, with domestic pressure intensifying after 24 soldiers were killed Monday in the army's deadliest day since it launched its Gaza ground operations.

Netanyahu, however, has been adamant the war will continue, vowing in a speech at a military base Thursday: "Hamas came to wipe us out -- we will wipe them out."

- Fears of wider escalation -

Egypt and Qatar have acted as mediators in the conflict, including in November, when a brief truce agreement led to the release of 105 hostages.

But Netanyahu was allegedly caught on tape telling hostages' families this week that Qatar's mediation was "problematic", blaming it for funding Hamas.

The Gulf state said it was "appalled" at the remarks, which "if validated, are irresponsible and destructive to the efforts to save innocent lives".

The Gaza war has sparked fears of a wider escalation, with a surge in violence involving Iran-aligned Hamas allies across the Middle East.

Yemen's Huthis have been firing missiles at shipping in the Red Sea since mid-November, prompting the United States and Britain to launch air strikes on the Iran-backed rebels.

Concerns are growing about the economic fallout from the attacks in the commercially vital waters, with European Central Bank president Christine Lagarde warning Thursday of higher eurozone inflation and disruptions to global trade.

The UN's International Court of Justice will on Friday hand down its initial ruling on a genocide case brought against Israel by South Africa.

The ruling could potentially order Israel to stop its Gaza military campaign, although the Hague-based court has little power to enforce its judgements. 

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