Palestinian families in southern Gaza flee their homes amid violence. Associated 
Press
The Obama administration, Israel and other Middle East allies are refashioning an Egyptian cease-
fire proposal to assure Hamas that Gaza's economic interests would be addressed if the Islamist 
group stops rocket attacks, senior U.S. and Arab officials said.

These diplomats outlined a two-stage plan as the 16th day of Israel's military offensive brought 
intense fighting to southern Gaza, raising the Palestinian death toll to nearly 700 and the Israeli toll 
to 35 in a conflict in which Hamas's military wing has shown surprising strength.

Under the plan, Israel and Hamas would agree to stop military operations in the coming days. And
 the U.S. and the international community would then move quickly to begin talks on a longer-term recovery program for the impoverished coastal enclave.


U.S. Secretary of State John Kerry said there have been "steps forward" in the diplomacy aimed at ending the fighting between Israel and Hamas. Can the U.S. help broker peace? Aaron David Miller, Wilson Center vice president for new initiatives, joins the News Hub with Sara Murray. Photo: Getty Images.

Secretary of State John Kerry outlined the emerging proposal during more than two hours of 
discussions with Israeli Prime Minister Benjamin Netanyahu in Tel Aviv on Wednesday and a 
separate hourlong meeting with Palestinian Authority President Mahmoud Abbas in the West Bank. 
U.S. officials said they expect Mr. Kerry to remain in the region until the weekend.

Hamas, which rules Gaza, rejected a cease-fire proposal put forward by Egyptian President Abdel 
Fattah Al Sisi last week, saying it wasn't consulted and that the offer didn't go far enough to lift 
Egypt's and Israel's economic siege of Gaza or free Palestinian prisoners in Israeli jails.
Further strikes hit Gaza City on Tuesday night as Israel continues its offensive against Hamas. Elsewhere, the UN Secretary General met with the Israeli Prime Minister in Tel Aviv. Mark Kelly reports.
The battle lines between Israeli and Hamas are playing out across social media in efforts to drum up support. WSJ's Lisa Fleisher explains on digits. Photo: Getty Images.

"There was a cease-fire deal that only one side 
agreed to," said a senior U.S. official who traveled to
 Israel and Egypt with Mr. Kerry on Wednesday. "The
 question is how do we get to where the violence can
 be stopped and then we get to these deeper issues."
Offering Hamas incentives such as economic aid and 
freer movement of goods into Gaza and eased 
restrictions on movement could meet with Israeli 
resistance unless it could be monitored to keep out 
weapons or Hamas is disarmed.

Israel launched its military operations in Gaza to d
egrade Hamas's rocket arsenal and network of 
tunnels that Hamas fighters are increasingly using to 
carry out attacks against Israelis.

U.S. officials have argued to Mr. Netanyahu that 
Israel's military has gone a long way toward achieving
 those aims since the offensive began July 8.
Hamas's political chief, Khaled Meshaal, said in Qatar
 on Wednesday his movement was open to a "pause"
 in fighting on humanitarian grounds but demanded 
guarantees that Gaza's economic interests would be
 addressed through the opening of trading routes into
 Gaza and the easing of financial restrictions that 
affect Hamas's leaders.

Mr. Meshaal didn't indicate whether the emerging 
proposal would be enough for Hamas to stop its 
rocket attacks. Mr. Kerry has been using Qatar and 
Turkey as conduits through which to engage with 
Hamas on the cease-fire proposal.

"We will not accept any initiative that does not end the blockade on our people and that does not 
show respect to their sacrifices," Mr. Meshaal said. "Everyone wants us to accept a cease fire and
 then negotiate for our rights. We reject this."
U.S. Secretary of State John Kerry meets with Israel's Prime Minister 
Benjamin Netanyahu in Tel Aviv on Wednesday. Reuters

In Gaza's streets, neither side appeared ready to back down. Israeli forces battled heavily armed 
militants around the southern city of Khan Younis. People fleeing their homes described heavy tank
 shelling, airstrikes and small-arms fire.

At Nasser Medical Center, the main hospital in Khan Younis with a trauma center, patients streamed
 in by ambulance and private car, many nursing gaping shrapnel wounds and broken limbs.
Israel said three of its soldiers died in Gaza on Wednesday,
 bringing to 32 the number killed since the army launched i
ntensive aerial bombardments on July 8 and a ground 
assault that began Thursday. Three civilians have died in
 Israel—the latest a worker from Thailand who was killed 
Wednesday when a rocket fired from Gaza struck an 
agricultural collective in Hof Ashkelon, according to an o
fficial of that region.

The Health Ministry in Gaza said the Palestinian death toll 
rose by 72 to 693 killed, with more than 4,200 wounded. The 
dead included 166 children and 67 women, it said.
In Geneva, U.N. Human Rights Council voted to open an
 inquiry into Israel's military action. The U.S. was alone on 
the 47-member council voting against the move.

Mr. Netanyahu's office called the decision "a travesty," reiterating that Hamas and its allies put 
Gaza's civilians in harm's way by operating among them.
Hamas's surprising military strength has complicated cease-fire efforts by bolstering the group's 
resolve to end Israel's blockade of the Gaza Strip, its main demand.

As long as Israeli troops had refrained from entering Gaza, Israel's Iron Dome missile defense
 system kept most Israelis out of harm's way.
WSJ's Nick Casey provides this first-hand look at a damaged hospital that was struck in Gaza Monday. Israel said fighters from Hamas, the militant group it's been targeting, were storing anti-tank missiles "in the immediate vicinity."

But by launching a ground incursion last week, Israel shifted to terms of engagement and a l
andscape very familiar to Hamas fighters.

Israeli military officials acknowledged this week that the abilities of Hamas's military wing were 
unexpected. Hamas fighters are better-equipped and better-trained than in previous clashes in 2009 
and 2012, said an Israeli military officer who requested anonymity.

The militants are using a strategy of avoidance, relying on snipers and improvised explosive devices 
to hit Israeli forces rather than engaging in face-to-face fighting where they would be at a big 
disadvantage, he said. They have infiltrated Israel through five cross-border tunnels, even as the 
army moves to destroy others.

Rocket fire from Gaza caused the U.S. and other countries Tuesday to suspend flights to Tel Aviv. 
The U.S. Federal Aviation Administration late Wednesday lifted restrictions on American carriers.
An Israeli tank moves near the border with Gaza on Wednesday. Agence France-
Presse/Getty Images

By standing up to the current Israeli offensive, Hamas has at least for the moment transformed 
simmering dissatisfaction among Gazans into anger at their neighbor, interviews with residents of
 the coastal strip suggest.

"God bless them for resisting," said Tamer Abu Noquera, a 44-year-old municipal employee in Khan
 Younis, who described himself as a critic of Hamas.

Through the first part of this year, Gaza's rulers were losing an estimated $30 million in monthly 
revenue from the closure of its tunnels with Egypt, through which it smuggled a wide variety of 
consumer goods, a Hamas official said. Its authority at home was under strain.

For Hamas and nearly all Palestinians living in Gaza, ending or softening the blockade of Gaza is a
 key to ending the fighting, said Omar Shaban, a Palestinian political scientist from Gaza-based 
research group Palthink for Strategic Studies.

"They must be given something they can lose if there is a war," Mr. Shaban said. "Imagine that the 
war ends without good conditions in the cease-fire. Then we can simply accept war in another two 
years."
—Asa Fitch in Jerusalem contributed to this article.
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