The first major ground battle in two weeks of Israel-Hamas fighting has exacted a bloody price, with 65 Palestinians and 13 Israeli soldiers dead and thousands of terrified Palestinian civilians fleeing their devastated neighbourhood.

The IDF uncover another Hamas tunnel.

The IDF uncover another Hamas tunnel.

Israeli prime minister Benjamin Netanyahu said the offensive would continue “as long as necessary” to end terror attacks from Gaza on Israeli civilians, but Hamas seems defiant, ceasefire efforts are stalled, and international criticism is growing as the Palestinian death toll rises.

United Nations secretary general Ban Ki-moon called Israel‘s latest incursion “atrocious” and the UN Security Council began an emergency session on Gaza early today at the request of Jordan.

Meanwhile Israel‘s UN envoy has denied a Hamas claim that his group had captured an Israeli soldier. “There’s no kidnapped Israeli soldier,” Ron Prosor told reporters.

The latest deaths marked the highest number of soldiers killed on a single day since Israel‘s war in Lebanon in 2006.

The ferocious battle in Gaza City’s Shijaiyah neighbourhood came on the third day of Israel‘s ground offensive, which had been preceded by a 10-day air campaign.

In all, at least 432 Palestinians have been killed and more than 3,000 wounded in the past two weeks. The overall death toll on the Israeli side rose to 20, including 18 soldiers, along with dozens of wounded troops.

Yesterday’s battle began when Israeli troops backed by tanks entered the densely-populated Shijaiyah district just after midnight. They were met by a “huge” level of resistance by Hamas fighters who fired anti-tank missiles, rocket-propelled grenades and automatic weapons from houses and buildings, said army spokesman Lt Col Peter Lerner.

Residents said they came under intense Israeli tank fire. “The gate of hell has opened, and shrapnel came through the windows,” Jawad Hassanain said.

As dawn broke the extent of the devastation slowly became apparent. At least 65 Palestinians had been killed and nearly 300 wounded, Gaza health officials said, while dozens of homes were badly damaged or destroyed.

Casualties were rushed to Gaza’s central Shifa Hospital. Wailing parents, some covered with blood or dust from debris, carried children peppered by shrapnel, and the emergency room quickly overflowed, forcing doctors to treat some patients in a hallway.

During a brief Red Cross-brokered lull later in the day, rescue workers toured the neighbourhood to retrieve the dead, pulling bodies from the rubble of homes.

The 13 Israeli soldiers were killed in several separate incidents in Shijaiya, including gun battles and rocket attacks. In the deadliest, Gaza fighters detonated a bomb near an armoured personnel carrier, killing seven soldiers inside, the army said. In another, three soldiers were killed when they became trapped in a burning building.

Despite the losses, army chief Lt Gen Benny Gantz said Israel intended to escalate the operation. Gaza residents received automated phone calls last night, warning them to evacuate refugee camps in the centre of the Gaza Strip.

Israel launched the campaign to hurt Hamas’ ability to fire rockets and to destroy tunnels dug by the militants to sneak into the Jewish state to carry out attacks.

Shijaiyah was targeted as a Hamas stronghold and because 8% of more than 1,700 rockets fired at Israel since July 8 were launched from there, said Lt Col Lerner.

The military said that since the beginning of ground operation late last week, it had killed 110 Gaza fighters and targeted more than 1,000 sites linked to militants.

Israeli soldiers march in the field in southern Israel near the border with Gaza.

Israeli soldiers march in the field in southern Israel near the border with Gaza.

Soldiers also exposed 14 tunnels, all inter-connected and leading towards Israel, and detonated six of them, including one 1.2 km long and an access point within a house, the army said.

“It’s like the Underground, the Metro or the subway,” said Lt Col Lerner.

The first days of the current ground offensive were in marked contrast to Israel‘s last major invasion of Gaza in January 2009, known in Israel as Cast Lead, when Hamas fighters rarely engaged Israeli forces.

But Gaza’s militants now seem better armed, with weapons including anti-tank rockets. “I see an escalation in weaponry,” Amos Yadlin, a former Israeli military intelligence chief, told Israel TV’s Channel 10. “This isn’t the same weaponry as in Cast Lead.”

Mr Netanyahu said the ground campaign was vital to Israel‘s security because the tunnels could be used for “mega terror attacks and kidnappings”, but acknowledged the operation was “full of risks”.

He said the ultimate goal was to “restore a sustainable quiet” for Israel‘s citizens, then hoped to enlist the international community “to demilitarise Gaza”.

Asked about the mounting number of dead and wounded among Palestinians, he saidIsrael was targeting only militants.

“All civilian casualties are unintended by us, but intended by Hamas. They want to pile up as many civilian dead as they can. It’s gruesome,” Mr Netanyahu said.

“They use telegenically dead Palestinians for their cause. They want the more dead the better.”

Meanwhile, a speedy ceasefire seems elusive, as the US and some of the regional powers disagree on how to resolve the Israel-Hamas conflict.

Hamas rejected Egypt’s proposal last week that both sides halt fire and then discuss a possible easing of the Gaza border blockade, enforced by Israel and Egypt since Hamas seized Gaza in 2007.

For Hamas, easing the blockade is key to survival after an intensified border closure of Gaza by Egypt in the past year drove the movement into a crippling financial crisis. Hamas has insisted on guarantees concerning the blockade before it stops fighting and has demanded that others, including Qatar, join Egypt as a mediator.

US secretary of state John Kerry sided with Israel and Egypt yesterday, saying giving in to Hamas’ conditions for a ceasefire would mean rewarding terrorism.

Qatar is seen as more sympathetic to Hamas. Foreign minister Khalid al-Attiya said it was not important which country achieved the terms of a ceasefire so long as justice was achieved.

“We condemn the acts of aggression that Israel has carried out against the Palestinian people, and most recently the massacre of Shijaiyah in which most of those killed were children,” he said.

Mr Ban had harsh words for Israel‘s military operation, while reiterating his call for an immediate ceasefire.