Palestinians run following what police said was an Israeli air strike on a house in Gaza city. Picture: Majdi Fathi

Gaza/Jerusalem - Israeli air strikes shook Gaza every few minutes on Wednesday, and militants kept up rocket fire at Israel's heartland in intensifying warfare that Palestinian officials said has killed at least 37 people in the Hamas-dominated enclave.

Missiles from Israel's Iron Dome defence system shot into the sky to intercept a rocket launched, for the second straight day, at Tel Aviv, the country's commercial capital.

Other communities near Tel Aviv in central Israel and in the south, closer to Gaza, were also targeted. In the longest-range attack since Tuesday, when Israel stepped up its offensive, a rocket hit Zichron Yaakov, a town 115 kilometres north of Gaza, slightly injuring one person, Channel Two television said.

No Israeli fatalities were reported, and Israeli news reports hailed as heroes the military crews of the Iron Dome batteries, which are made in Israel and partly funded by the United States.

With frequent explosions from Israeli air strikes echoing through Gaza City, its main shopping street was largely deserted. Local residents reported hundreds of attacks on Wednesday.The Israeli military said it had attacked 550 Hamas sites, including 60 rocket launchers, over the past two days.

Israel's military said concealed rocket launching sites, weapons storage facilities, tunnels and command and control positions, as well as the homes of gunmen, were hit. Palestinian officials said at least 25 houses were either destroyed or damaged and not all of the dwellings belonged to militants.

The build-up to the most serious hostilities between Israel and Gaza militants since an eight-day war in 2012 began three weeks ago with rocket attacks following the abduction and killing of three Jewish seminary students in the occupied West Bank.

Egypt brokered a truce in the conflict two years ago, but its military-backed government's hostility toward Islamist Hamas could make a mediation role more difficult.

At least 29 civilians, including five children, were among the 37 Palestinian dead in two days of fighting, and 230 people have been wounded, hospital officials said.

Palestinian rocket barrages have sent Israelis racing for bomb shelters, but businesses remained open in Israel, traffic flowed and the Tel Aviv Stock Exchange seemed untroubled, with shares opening higher.

Israeli leaders, who seem to have wide popular support at home for the Gaza operation, have warned of a lengthy campaign and possible ground invasion of the heavily populated Palestinian territory.

But questions were already being asked on radio talkshows about an exit strategy and when rocket fire would end.

At a sidewalk cafe on a fashionable avenue in Tel Aviv, Israel's most free-wheeling city, patrons seemed to take an air raid siren in their stride, staying in line for their coffee as joggers and cyclists passed.

About 80 kilometres away, Gaza's busiest shopping street was largely deserted, though some convenience stores remained open.

“I am fine, as long as Tel Aviv is being hit,” said Abu Ahmed, 65, as he bought cigarettes.

In an air strike on a home in northern Gaza, a top leader of the Islamic Jihad group and five of his family members were killed, the Palestinian Interior Ministry said. An 80-year-old Palestinian woman was killed in an Israeli attack on another target in central Gaza, local officials said.

Israeli strikes on militants' homes, local residents said, are usually preceded by either warning fire or a telephone call telling its inhabitants to flee, in an attempt by Israel to avoid civilian casualties. But such bombing sometimes injures or kills people in neighbouring houses.

Israeli leaders have called the persistent Palestinian rocket salvoes - which have also triggered air raid sirens in Jerusalem - intolerable and have approved the potential mobilisation of up to 40 000 reserve troops.

“The government has instructed the military to deploy forces along the border with Gaza to be ready for any contingency,” said Mark Regev, a spokesman for Prime Minister Benjamin Netanyahu. “We have a number of options. Our goal, our overriding goal, is to safeguard the people of Israel and to end the launching of rockets from Gaza on our citizens.”

An Israeli military spokesman said militants in Gaza had dozens of long-range rockets.

Washington backed Israel's actions in Gaza, while the European Union and United Nations urged restraint on both sides.

US President Barack Obama, in a German newspaper article to be published on Thursday, said: “At this time of danger, everyone involved must protect the innocent and act in a sensible and measured way, not with revenge and retaliation.”

Western-backed Palestinian President Mahmoud Abbas, who is based in the Israeli-occupied West Bank and entered a power-sharing arrangement with Hamas in April after years of feuding, said he had spoken to Egypt about the Gaza crisis.

Under President Abdel Fattah al-Sisi, Cairo has secured closures on the Egyptian-Gaza border, increasing economic pressure on Hamas from a long-running Israeli blockade.

“Sisi stressed Egypt was interested in the safety of the Palestinian people in the Gaza Strip and sparing this grave assault,” a statement from Abbas's office said, adding that Cairo would “exert efforts to reach an immediate ceasefire”.

But Israel appeared to play down any expectations that Egypt would intervene soon.

Asked whether Egypt was acting to calm the situation, Israeli Strategic Affairs Minister Yuval Steinitz, said on Israel Radio: “We have a degree of cooperation, or dialogue, with Egypt, on which I won't elaborate. It is not so significant.”

In the West Bank, about 400 Palestinian youths, chanting their support for Hamas's armed wing, threw stones at an Israeli army checkpoint on Wednesday. Soldiers responded with tear gas and rubber bullets.

Israel has blamed Hamas for the killing of the three Jewish seminary students who disappeared while hitchhiking in the West Bank on June 12. Hamas has neither confirmed nor denied a role.

The rocket fire from Gaza began after Israel arrested hundreds of Hamas activists in a West Bank sweep it mounted in tandem with a search for the youths, who were found dead last week. A Palestinian teen was abducted and killed in Jerusalem last Wednesday in a suspected revenge murder. Six Israelis have been arrested in that case.

While threatening an “earthquake” of escalation against Israel, Hamas said it could restore calm if Israel halted the Gaza offensive, once again committed to a 2012 ceasefire truce and freed the prisoners it detained in the West Bank last month. - Reuters