The death toll in Gaza topped 700 on Thursday as Israeli tank fire before dawn killed 16 people in the Hamas-dominated coastal territory, including six members of the same family, Palestinian health officials said.
The continued violence defied world efforts to achieve a ceasefire between Israel and the Islamist group Hamas after 17 days of fighting, though some officials voiced optimism that a limited truce may be within reach.
US Secretary of State John Kerry, flying back from Israel to Cairo for more talks with Egyptian mediators, reported some progress in ceasefire talks.
An Egyptian official said on Wednesday a humanitarian truce may go into effect by the weekend, in time for the Eid al-Fitr festival, Islam's biggest annual celebration that follows the fasting month of Ramadan.
However, a senior US official said this was a US hope but a truce was by no means locked in.
"It would not be accurate to say that we expect a ceasefire by the weekend," said the US official, who spoke on condition of anonymity. "We are continuing to work on it, but it is not set at this point."
Israel's security cabinet released no decision after meeting late into the night on a proposed humanitarian truce under which fighting would cease immediately but negotiations for terms for an extended deal would begin only in several days' time.
Hamas leader Khaled Meshaal, speaking in Qatar, said his fighters had made gains against Israel and expressed support for a humanitarian truce, but only if Israel eased restrictions on Gaza's 1.8 million Palestinians.
"Let's agree first on the demands and on implementing them and then we can agree on the zero hour for a ceasefire ... We will not accept any proposal that does not lift the blockade ... We do not desire war and we do not want it to continue but we will not be broken by it,” Meshaal said on Wednesday.
Israel has signaled it prefers to press on with its ground troops offensive to find and destroy Hamas's rocket stores and wipe out a vast network of tunnels Israel sees as having been built for the purpose of infiltrating its territory.
But Israel is also under growing pressure to curtail the fighting, especially with American aviation authorities having banned US flights to Tel Aviv for the past two days, spooked by rocket salvoes out of the Gaza Strip.
On Tuesday the US Federal Aviation Administration took the rare step of banning flights to Tel Aviv, and renewed the order on Wednesday. Many other foreign carriers, on heightened alert after a Malaysian airliner was shot down over a combat zone in Ukraine last week, followed suit. Israeli carriers continued to operate.
Hamas spokesman Sami Abu Zuhri praised the flight bans as a "great victory" for the Islamist group.
Israel also came under criticism from the UN High Commissioner for Human Rights Navi Pillay, who said there was "a strong possibility" Israel was committing war crimes in Gaza, where 703 Palestinians, mostly civilians, have been killed in the fighting.
Pillay also condemned indiscriminate Islamist rocket fire out of Gaza, and the United Nations Human Rights Council said it would launch an international inquiry into alleged violations.
Israeli Prime Minister Benjamin Netanyahu reacted furiously.
"The decision today by the HRC is a travesty," he said in a statement. "The HRC should be launching an investigation into Hamas's decision to turn hospitals into military command centers, use schools as weapons depots and place missile batteries next to playgrounds, private homes and mosques."
The UN secretary-general, Ban Ki-moon, lashed out at militants in Gaza, by expressing "outrage and regret" at rockets found inside a UN school for refugees, for the second time during the current conflict.
Storing the rockets in the schools "turned schools into potentially military targets, endangering the lives of innocent children," UN employees and the tens of thousands of Palestinians seeking shelter at Gaza schools from the fighting, Ban said. He urged an investigation.
Kerry returned to Egypt late on Wednesday after meeting in Jerusalem and the West Bank with Palestinian President Mahmoud Abbas, Ban and a grim-faced Netanyahu.
"We have certainly made some steps forward. There is still work to be done," said Kerry, on one of his most intensive regional visits since Netanyahu called off US-sponsored peace negotiations over Abbas's power-share deal with Hamas in April.
Israel launched its offensive on July 8 to halt rocket salvoes by Hamas and its allies, which have struggled under an Israeli-Egyptian economic blockade on Gaza and were angered by a crackdown on their supporters in the occupied West Bank.
After an aerial and naval bombardment failed to quell the outgunned guerrillas, Israel poured ground forces into the Gaza Strip last Thursday to destroy Hamas's rocket stores and tunnels.