Fire rages following an Israeli strike on an area designated for displaced Palestinians in Rafah on Sunday. Reuters

Israel faced a wave of international condemnation on Monday over a strike that Gaza officials said killed 45 people when it set off a fire that ripped through a tent city for displaced Palestinians.

Israel said it was looking into the "grave and awful" impact on civilians after the latest mass casualty event in the Gaza war which has raged since Oct.7.

Adding to already heightened tensions since Israel launched a ground operation in Rafah in early May, the Israeli and Egyptian militaries reported a "shooting incident" Monday that killed one Egyptian guard in the border area between Egypt and the southern Gaza Strip.

Both forces said they were investigating.

The UN Middle East envoy Tor Wennesland called on Israel to conduct a "thorough and transparent" investigation into the strike, as the Israeli military said it was launching a probe.

UN human rights chief Volker Turk decried "horrific" images that "point to no apparent change in the methods and means of warfare used by Israel that have already led to so many civilian deaths."

Mourners react next to the bodies of Palestinians killed in an Israeli strike in Rafah on Monday. Reuters

French President Emmanuel Macron wrote on X that "these operations must stop. There are no safe areas in Rafah for Palestinian civilians."

EU foreign ministers agreed to call a meeting with Israel to get it to explain its actions in its Rafah offensive despite a UN court order to halt it, said the bloc's top diplomat Josep Borrell, who called the strike "horrifying."

Israeli Prime Minister Benjamin Netanyahu said the government was investigating the "tragic accident" which he told parliament occurred "despite our best efforts" to protect civilians.

Israeli government spokesman Avi Hyman earlier said: "It was definitely grave. Any loss of life, civilian live, is grave and is awful. We seek to go after Hamas and limit civilian casualties."

Relatives of captives held in Gaza, who have increased pressure on Netanyahu's government demanding action to secure a hostage release deal, heckled the premier from the public gallery as he was speaking and raised posters of their loved ones.

A Palestinian child, wounded in an Israeli strike on an area designated for displaced people, is assisted at a hospital.

Gaza's civil defence agency said the strike ignited a fire that tore through a displacement centre in northwestern Rafah near a facility of the UN agency for Palestinian refugees, UNRWA.

"We saw charred bodies and dismembered limbs ... We also saw cases of amputations, wounded children, women and the elderly," said civil defence agency official Mohammad Al Mughayyir.

"The sky suddenly lit up," said displaced Palestinian Muhannad, an eyewitness.

One survivor, a woman who declined to be named, said: "We heard a loud sound and there was fire all around us. The children were screaming."

Footage from the Palestinian Red Crescent Society showed chaotic nighttime scenes of paramedics racing to the attack site and evacuating the wounded.

Mughayyir said the rescue efforts were hampered by war damage and the impacts of Israel's siege.

"There is a fuel shortage ... there are roads that have been destroyed" as well as "a shortage of water to extinguish fires", he said.

The Israeli attack sparked strong regional protests from mediators Egypt and Qatar as well as from Jordan, Kuwait, Saudi Arabia and Turkey.

Egypt deplored the "targeting of defenceless civilians" and labelled it part of "a systematic policy aimed at widening the scope of death and destruction in the Gaza Strip to make it uninhabitable."

A man reacts next to the body of a Palestinian child killed in an Israeli strike in Rafah on Sunday. Reuters

Jordan accused Israel of "ongoing war crimes," Saudi Arabia condemned "the continued massacres," and Turkish President Recep Tayyip Erdogan vowed "to hold these barbarians and murderers accountable".

Qatar condemned a "dangerous violation of international law" and voiced "concern that the bombing will complicate ongoing mediation efforts" towards a truce.

The African Union chair Moussa Faki Mahamat also condemned the attack on X saying: "Israel continues to violate international law with impunity and in contempt of an ICJ ruling two days ago ordering an end to its military action in Rafah."

The top world court, the International Court of Justice, on Friday ordered Israel to halt any offensive in Rafah and elsewhere that could bring about "the physical destruction" of the Palestinians.

Palestinians put out a fire at the site of an Israeli strike on an area designated for displaced people in Rafah. Reuters

Philippe Lazzarini, head of UNRWA which has been central to aid operations in the besieged territory during the war, said on X that "with every day passing, providing assistance & protection becomes nearly impossible."

"The images from last night are testament to how Rafah has turned into hell on Earth," he said, with "heavy movement restrictions," ongoing Israeli strikes and Hamas rocket launches, and other "challenges ... that do not allow us to distribute aid".

On Tuesday, Spain, Ireland and Norway are due to formally recognise a Palestinian state -- a step so far taken by more than 140 UN members but few western powers.

Israel opposes the move and on Monday announced punitive steps against Madrid, ordering its consulate in Jerusalem to stop offering services to Palestinians from June 1.

Agence France-Presse