Gaza Fighting Intensifies Despite Truce Talks

As the leaders of Israel and Hamas examined the fine points of an Egyptian ceasefire proposal, Israeli forces pushed hard into central Gaza Thursday, striking over 70 "enemy targets", officials said. But a few Israeli artillery shells went amiss, crashing into the United Nations compound and a hospital inside the besieged Palestinian territory. Dozens more civilians were killed, according to Palestinian hospital staff.

Meanwhile, as Hamas and Israel seemed to edge closer to accepting a cease-fire, Israeli forces thrust deep into Gaza on Thursday and subjected the enclave's main city of over 500,000 people to a relentless hammering. Israeli media reported that three top Hamas commanders — Said Siam, the Interior Minister, security chief Salah Abu Shrek and Mahmoud Watfah, head of the military wing — were killed in an air strike inside Jabaliya refugee camp. Israeli military sources told TIME that Siam, a hardliner ranked third within the political hierarchy, had been on the list of targeted Hamas leaders since the 20-day old operation began. "Hamas had promised us a big surprise when we entered Gaza, but the killing of Siam is the surprise we're giving them," exulted one senior intelligence officer. (See images of Israel's ground war in Gaza)

U.N. Secretary General Ban Ki-Moon called the shelling of the U.N. compound "an outrage", and demanded a full investigation. The bombardment occurred shortly before the Secretary-General was to meet with Israeli officials to plead for an end what he called the "unbearable" conflict in Gaza. Diplomatic niceties were not much in evidence, however. The shelling puts a further strain on already tense relations between Israel and the U.N. Relief officials of the world body in Gaza have strongly criticized the Israeli action for its humanitarian toll, and Israelis are generally suspicious of an organization they accuse of long-standing bias towards the Palestinians.

Three people were injured when a shell slammed into the U.N. warehouse that stores fuel for Gaza's over-burdened hospitals and food for thousand's of poor Palestinian families. Eyewitnesses said the burning sacks of food blazed into the evening, covering Gaza's sky with a pall of greasy, black smoke. Many of the 700 Gazans who had retreated inside the U.N. compound to take refuge from the fighting then fled into the street with nowhere left to go, as artillery shells thudded into buildings around them, showering the streets with chunks of concrete and glass, eyewitness said.

Palestinians say more than a dozen civilians died in the fighting on Thursday, pushing the death toll to over 1,060. Witnesses described thousands of families carrying babies and pushing their elderly in wheelchairs fleeing Israeli tanks. Civilians in the densely packed slice of land carpeted with teeming slums are finding themselves with no safe places of refuge as the Israelis tighten their grip. TIME correspondent Azmy Keshawi recounted the scene in his neighborhood: "We knew that an Israeli sniper was on top of the next-door apartment building. As one of our neighbors tried to leave the building, he was shot four times and just bled to death. There was nothing we could do with the sniper there."

Israeli Prime Minister Ehud Olmert told the U.N. Secretary General that he "regretted" the shelling of the U.N. compound, but added: "I don't know if you know, but Hamas attacked from within the UNRWA compound during the humanitarian cease-fire." One U.N. official dismissed this claim as "nonsense" and spokesman Chris Gunness claimed that in a liaison meeting between U.N. and the Israeli officials, "The military admitted that the firing did not originate inside the U.N. compound but several hundred meters away." He added: "This isn't the first time that the Israeli government spokesman has made baseless accusations against the U.N. It's incrementally diminishing their credibility."

Israeli envoy Amos Gilad returned from Cairo on Thursday night to brief Olmert and his defense and foreign ministers about Hamas' response to the Egyptian truce proposals. Israeli officials claim that Hamas may be willing to drop two previous demands: that Israel withdraw its troops from Gaza before Hamas stops firing its rockets into Israel, and that Hamas should control the Gaza border crossings with Israel and Egypt. These sources say that Hamas has agreed that the Gaza crossings be manned by a force loyal to Palestinian President Mahmoud Abbas, a Hamas rival supported by Israel and the United States. So far, Olmert is still pondering his reply to the ceasefire offer.

Hamas, too, seemed out to inflict as much damage as possible on Israel before any truce. Militants fired over 30 rockets at Israeli towns, Thursday, wounding at least five people in Be'ersheva, including a child.

— With reporting by Aaron J. Klein/Tel Aviv