GAZA CITY, Gaza Strip - Israeli warplanes pounded the homes of Hamas leaders and ground troops edged closer to the Gaza Strip's densely populated urban centre Monday, as Israel weighed whether to escalate its devastating offensive.

Despite the tightening Israeli cordon, Hamas fighters managed to fire off at least four rockets Monday morning. There were no reports of injuries, though one rocket hit a house in the southern city of Ashkelon.

Black smoke rose over Gaza City's suburbs, where the two sides skirmished throughout the night. At least six Palestinians died in the new air strikes or of wounds Monday, Gaza health officials said. One of the dead was a fighter killed in a northern Gaza battle.

The army announced Sunday that it was sending reserve units into Gaza to assist thousands of ground forces already in the territory. The use of reserves is a strong signal that Israel is planning to move the offensive, which Gaza officials say has killed some 870 Palestinians, into a new, more punishing phase.

Israel launched the offensive Dec. 27, bombarding Gaza with dozens of air strikes before sending in ground forces a week later.

Egypt, which often serves as a mediator between Israel and Hamas, has played a key role in trying to forge a ceasefire.

Talks "are progressing slowly but surely because each party wants to score some points," Hossam Zaki, the spokesman for Egypt's Foreign Ministry, told the British Broadcasting Corp. "We would like to be able to bridge some gaps and then proceed immediately to a ceasefire."

International envoy Tony Blair was in Cairo on Monday, meeting with President Hosni Mubarak following talks with Israeli leaders Sunday. Egypt has put forward a three-stage proposal to end the fighting.

"I think the elements of an agreement for the immediate ceasefire are there," Blair said, adding that, while more work needed to be done, he hoped to see a ceasefire "in the coming days."

Israel's representative to the talks, Defence Ministry official Amos Gilad, was in close contact with Egypt. But in a sign that more work is needed, he postponed a trip to Cairo, officials said.

With Israeli troops surrounding Gaza's main population centres, Israeli leaders have given mixed signals on how much further the army is ready to push, saying the operation is close to achieving its goals but vowing to press forward with overwhelming force.

"Israel is a country that reacts vigorously when its citizens are fired upon, which is a good thing," Foreign Minister Tzipi Livni told Israel radio Monday. "That is something that Hamas now understands and that is how we are going to react in the future, if they so much as dare fire one missile at Israel."

Israeli security officials say they have killed hundreds of Hamas fighters, including top commanders. However, there has been no way to confirm the claims, and Hamas officials say the group is determined to keep fighting.

Israeli leaders are expected to decide in the next day or two on whether to push the offensive into a third phase -- in which the army takes over larger areas of Gaza. This move would require the use of thousands of reserve units massed on the border with Gaza.

A push into densely crowded urban areas would threaten the lives of many more civilians. More than 20,000 Palestinians have already fled Gaza's rural border areas and crowded into nearby towns, staying with relatives and at United Nations schools turned into makeshift shelters.

International aid groups have repeatedly said Israel must do more to protect Palestinian civilians, who make up more than half of the 900 dead.

Human Rights Watch has, meanwhile, accused Israel of firing artillery shells packed with the incendiary agent white phosphorus over populated areas of Gaza. The chemical, used for creating smoke screens and for illuminating battlefields at night, ignites when it comes in contact with oxygen and can cause serious burns and spark fires as it drifts to the ground in long trails of smoke.

Marc Garlasco, a military analyst working for the organization, said he witnessed such shelling from the Gaza-Israel border last weekend. He reviewed AP Television News footage on Monday of similar midair fire that he said was white phosphorus.


Barzak reported from Gaza City and Federman from Jerusalem.