GAZA - ISRAELI forces pushed deeper into Gaza city on Thursday and unleashed their heaviest shelling of its crowded neighbourhoods in three weeks of war, stepping up pressure on Hamas as the Islamist group weighed a ceasefire.

At least 15 Palestinians were killed in the Israeli attacks, medical officials said.

Dozens of terrified residents were seen fleeing on foot.

Thousands more huddled in homes that provided precarious shelter while explosions tore through rubble-strewn streets clouded by smoke.

'It is a catastrophe,' one woman said, walking quickly away from the area and carrying a child in her arms as two other children ran behind her to keep up.

'We took our money and passports. We have to carry some identification with us in case we get killed,' she said. 'Hamas can claim victory if it wants but we just need this bloodshed to end.'

The Palestinian death toll from the air-and-ground offensive has risen to at least 1,055, according to the Hamas-run Health Ministry in Gaza. A Palestinian rights group said 670 of the dead were civilians. Thirteen Israelis have been killed - 10 soldiers and three civilians hit by Hamas rocket fire.

A senior Western diplomat said Israel appeared to be trying to make last-minute gains on the ground before a truce could be imposed to end an offensive it began on Dec. 27 with the declared aim of ending Hamas rocket attacks.

'It's a classic Israeli strategy,' the diplomat said.

An Israeli envoy was to meet Egyptian mediators in Cairo after a Hamas delegation concluded talks on an Egyptian truce proposal by repeating their demand that Israel withdraw its troops and lift a long-standing blockade on coastal Gaza.

Israel, which wants an end to cross-border rocket salvoes and guarantees that Hamas cannot smuggle in more weapons from tunnels to neighbouring Egypt, has said it would not agree to a truce allowing the Palestinian Islamists to regroup and rearm.

'We are keeping up the military pressure on Hamas, on the Hamas military machine,' Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert said on Al Jazeera TV.

'And at the same time, we've got a senior delegation in Cairo today to discuss the parameters of the end game which we want to see as soon as possible,' he said.

Israeli Defence Minister Ehud Barak said in broadcast remarks that Israel's armed forces would 'fight up to the last minute'.

UN compound hit

Much of the fighting was centred in the Tel al-Hawa neighbourhood.

The United Nations Relief and Works Agency (UNRWA) said its compound, where up to 700 Palestinians were being sheltered, was hit twice by fire and three staff members were injured.

UN Secretary-General Ban Ki-moon - who arrived in the region on Wednesday for several days of intense diplomacy on the conflict - voiced 'outrage' at a news conference in Israel over the shelling.

He said Mr Barak told him it was a 'grave mistake'.

UNRWA spokesman Christopher Gunness said after the incident the agency had put a hold on vehicle movements, but was not suspending aid operations.

An explosion blasted a tower block in the city centre that houses the offices of Reuters and several other media organisations, wounding a journalist for the Abu Dhabi television channel.

Reuters journalists working at the time said it appeared the southern side of the 13th floor of the Al-Shurouq Tower in the city centre had been struck by an Israeli missile or shell.

Israeli forces have encircled the city of 500,000 people for days. Tanks have made forays towards the centre to test the resistance of Hamas and other militant groups but have held off a full-scale assault on the densely populated urban maze.

About 14 rockets fired from the Gaza Strip hit southern Israel on Thursday, causing some damage but no casualties, police said.

In the occupied West Bank on Wednesday, Spain's Foreign Minister Miguel Angel Moratinos, a former EU Middle East envoy, said: 'My perception is we are very close to reaching a ceasefire. They are very close but still there is some work to be done.' Israeli officials said Israel was seeking an agreement with Washington on regional and international security guarantees that would bolster Egyptian efforts to ensure Hamas could not replenish its arsenal.

The United States and European powers, the officials said, would commit themselves to providing Egypt with advisers and new technology to combat smuggling tunnels.

Israel also was seeking an international maritime monitoring effort to prevent rocket smuggling by sea through Egyptian ports to block the shipments before they reach the border, the officials said.

Political analysts see a possible deadline for the fighting in Tuesday's inauguration of Barack Obama as US president, after which Israel may be reluctant to test White House support for a campaign that has stirred international outrage. -- REUTERS