Gaza militants said on Tuesday they were awaiting Israeli approval of a Cairo-brokered truce to their seven-day conflict as US Secretary of State Hillary Clinton arrived in the region to make an urgent push for peace.
The emerging signs of a deal to end seven days of violence that have claimed the lives of 136 Palestinians came as the Israeli army confirmed its first two fatalities from rocket attacks while another missile landed harmlessly just south of Jerusalem.
Optimistic negotiators had initially said that a deal could be announced in Cairo later Tuesday following days of negotiations brokered by an Egyptian government that is keen to make sure the unrest does not spill over to its volatile Sinai territory.
"There will be a joint press conference between Hamas and Islamic Jihad and the Egyptian mediators tonight to announce the truce," an Islamic Jihad source told AFP in Gaza City. A Hamas source separately confirmed the announcement.
But Hamas later said in a statement that Israel had still not responded to the Palestinian proposal as of 22:00 pm (2000 GMT).
"No agreement has been reached until now and it might not happen tonight. All options are open. Our people and the resistance are ready for anything," Hamas leader Izzat al-Rishq tweeted.
Egypt -- its new Islamic government now seen as the Palestinians' main protector -- also initially said the Israeli "aggression" would end within hours.
But Egyptian President Mohamed Morsi's spokesman later toned down that optimism by explaining that Cairo "hopes there will be a settlement soon."
Israeli television also cited local diplomatic sources as saying that a truce announcement would probably have to wait at least until Wednesday.
The bloodshed meanwhile showed no signs of abating as the military pressed on with its bombardment of northern Gaza positions from which most of the militants' rockets have been launched.
The Israeli for their part lost two soldiers to rocket attacks that continued unabated for the seventh day. The army said nearly 800 rockets have hit Israeli territory since the worst outbreak of Gaza violence in four years broke out last Wednesday.
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The incessant Israeli bombing killed another 26 Palestinians on Tuesday in attacks that also claimed the lives of two cameramen of the Hamas-owned Al-Aqsa TV station.
Israeli Prime Minister Benjamin Netanyahu said flatly on Tuesday that it was time for Hamas -- the Islamist movement which rules Gaza -- to choose between peace and further bloodshed.
"Our hand is outstretched in peace to those of our neighbours who want to make peace with us," Israel's rightwing premier said in a statement. "And the other hand is firmly grasping the sword of David."
A senior Hamas official told AFP in Cairo that a key sticking point was whether Israel would begin easing its six-year-old blockade of Gaza coinciding with the truce or at a later date.
"A compromise solution is for there to be agreement on lifting the siege, and that it would be implemented later at a specified time," he said.
Netanyahu and his key ministers decided in a closed-door meeting late Monday to place "a temporary hold on a ground incursion to give diplomacy a chance to succeed," a senior Israeli official told AFP.
The move came as UN Secretary General Ban Ki-moon met Netanyahu and again urged all parties to end fire "immediately".
The flurry of diplomatic activity has also seen US Secretary of State Clinton cut short an Asia tour to head to Israel where she arrived late Tuesday for talks with Netanyahu.
The chief US diplomat was due to travel to the West Bank capital Ramallah on Wednesday and also visit Cairo for an expected meeting with Morsi -- seen as one of the most influential negotiators in the current conflict.
Hamas is understood to be seeking guarantees that Israel will stop its targeted killings and end its blockade on the tiny coastal stretch of land.
Israel for its part is believed to be looking for a 24- to 48-hour truce as a buffer to work out a more permanent arrangement.
An Israeli government source said that negotiations from all sides were discussing a truce proposal "constantly" but that no "estimated time of arrival" for a truce could yet be made.