Hamas was reviewing a proposal for a six-week truce in its war with Israel, a source told AFP on Wednesday, as fighting raged in southern Gaza and the UN sought to restore aid funding.
Israeli strikes killed at least 125 people overnight and into the early morning across the Palestinian territory, the health ministry in the Hamas-ruled Gaza Strip said, while the military announced it had begun flooding the militants' tunnels.
AFPTV footage showed smoke rising over central Gaza and Khan Yunis, the coastal strip's main southern city that has become the focus of fighting in recent weeks.
As Qatari- and Egyptian-led mediation efforts gathered pace, a Hamas official said the group's leader Ismail Haniyeh "will be in Cairo today or tomorrow (Wednesday or Thursday)" to discuss the truce proposal.
A separate Hamas source told AFP the three-stage plan would start with an initial six-week halt to the fighting -- now in its fourth month -- that will see more aid deliveries into the besieged Gaza Strip.
Only "women, children and sick men over 60" held by Gaza militants will be freed during that stage in exchange for Palestinian prisoners in Israel, the source said, requesting anonymity due to the sensitivity of the talks.
There would also be "negotiations around the withdrawal of Israeli forces," with possible additional phases involving more hostage-prisoner exchanges, said the source, adding the territory's rebuilding is also among issues addressed by the deal.
Israel's Prime Minister Benjamin Netanyahu has ruled out pulling forces from Gaza.
He has also ruled out releasing "thousands" of Palestinian prisoners as part of any deal, though his office earlier called the talks "constructive".
Ron Dermer, an Israeli minister close to Netanyahu, is expected to meet Wednesday with US National Security Advisor Jake Sullivan in Washington, and Secretary of State Antony Blinken is due for another Mideast trip in the "coming days", a US official said.
The United States was among several top donor countries which suspended funding to the UN's aid agency for Palestinian refugees, UNRWA.
United Nations Secretary-General Antonio Guterres told a UN committee he had "met with donors to listen to their concerns and to outline the steps we are taking".
He called UNRWA "the backbone of all humanitarian response in Gaza".
UNRWA spokeswoman Tamara Alrifai told AFP the agency supports "an independent investigation" into the Israeli claims that led to the funding crisis. Israel accused several UNRWA staff members -- out of the agency's 33,000 -- of involvement in the October 7 attack that sparked the war.
Alrifai said that "if the countries that suspended their funding to UNRWA maintain their decision, the impact will be catastrophic on the people of Gaza" who face mass displacement, threats of disease and famine and dire shortages.
The UN agency provides Gazans with basic food supplies, medical services and shelters, and "if we were to unplug these services, then the situation will truly be a free fall," she warned.
The war was triggered by Hamas's October 7 attack on Israel, which resulted in the deaths of around 1,140 people, mostly civilians, according to an AFP tally based on official figures.
Militants also seized about 250 hostages. Israel says 132 of them remain in Gaza including at least 29 people believed to have been killed.
Following the deadliest attack in Israel's history, its military launched a withering air, land and sea offensive that has killed at least 26,900 people in Gaza, most of them women and children, according to the territory's health ministry.
The Israeli army said Wednesday its troops had killed dozens of militants and captured 10 during a raid on a school where they were allegedly hiding.
Israeli forces also raided what the army described as a weapons and explosives factory in Khan Yunis used by Islamic Jihad, an armed group fighting alongside Hamas.
In Gaza City, in the north, bodies shrouded in white cloth were laid on a hospital floor and carried on donkey carts ahead of burial.
Hamas reported "dozens of air raids" overnight on Khan Yunis, where vast areas have been reduced to a muddy wasteland of bombed-out buildings.
Witnesses said artillery shells hit the area of Nasser Hospital, the city's largest, where displaced Palestinians have been sheltering.
The Palestinian Red Crescent said on social media platform X that "Israeli shelling and gunfire continue" around another hospital in Khan Yunis.
Staff and patients at the Red Crescent's Al-Amal Hospital "and thousands of displaced people, primarily children and women, live in constant fear and anxiety", it said.
Israel accuses Hamas of operating from tunnels under hospitals in Gaza and of using medical facilities as command centres, a charge denied by the Islamist group, designated a "terrorist" organisation by the European Union and the United States.
Qatar, which helped broker a previous truce and hostage release in November, voiced hope the initial deal now being negotiated might lead to a permanent ceasefire.
Violence involving Iran-backed allies of Hamas across the Middle East has surged during the Israel-Hamas war, also drawing in US forces in the region.
Both Washington and Tehran have stressed they do not seek wider war.
The United States and Britain have also launched air strikes against Yemen's Iran-backed Huthi rebels, who have carried out repeated attacks on shipping in the Red Sea in what the rebels describe as an act of solidarity with Palestinians.
As a result, the International Monetary Fund said container shipping through the vital trade route has dropped this year by about one-third.