Palestinians inspect the rubble of a mosque destroyed after it was hit by an Israeli airstrike at Shati camp in Gaza. AP

Israeli warplanes pounded downtown Gaza City with relentless bombardments into early on Tuesday, after Israel’s prime minister vowed retaliation against the Palestinian group Hamas that would "reverberate for generations.”

The 4-day-old war has already claimed 1,600 lives, as Israel saw gun battles in the streets of its own towns for the first time in decades and neighbourhoods in Gaza were reduced to rubble. Hamas pledged to kill captured Israelis if strikes targeted civilians without warning.

Israel said that Hamas and other groups in Gaza are holding more than 150 soldiers and civilians snatched from inside Israel after the attack caught its vaunted military and intelligence apparatus completely off guard.

The Israeli military said it had largely gained control in the south and "restored full control” over the border. Spokesperson Richard Hecht said no Hamas fighters have crossed into Israel since last night, although infiltrations could still be possible.

As the Israeli military activated 300,000 reservists in a massive mobilisation, a major question was whether it will launch a ground assault into the tiny Mediterranean coastal territory. The last ground assault was in 2014.

Palestinians gather around the rubble of a building destroyed in Israeli strikes in Gaza on Monday. Reuters

Thousands of Israelis were evacuated from more than a dozen towns near Gaza, and tanks and drones were deployed to guard breaches in the Gaza border fence against new incursions. In Gaza, tens of thousands fled their homes as airstrikes levelled buildings.

The moves, along with Israel’s formal declaration of war on Sunday, pointed to Israel increasingly shifting to the offensive against Hamas, threatening greater destruction in the densely populated, impoverished Gaza Strip.

"We have only started striking Hamas,” Israeli Prime Minister Benjamin Netanyahu said in a nationally televised address. "What we will do to our enemies in the coming days will reverberate with them for generations.”

Associated Press