Israeli air strikes have killed more Islamic Jihad militants in Gaza as rocket fire towards Israel resumed after a brief overnight lull.

The death toll in the Gaza Strip rose to 26 Palestinians, including a seven-year-old boy, in the heaviest round of fighting in months.

The military said more than 360 rockets have been fired at Israeli communities since the violence erupted following an Israeli air strike that killed a senior Islamic Jihad commander accused of being the mastermind of recent attacks.

The latest fighting brought life in much of Israel to a standstill. Schools remained closed in Israeli communities near the Gaza border and restrictions on public gatherings continued as rockets rained down.

Those attacks came after the early morning strike on Tuesday killed Bahaa Abu el-Atta and his wife as they were sleeping. Rocket fire from Gaza reached as far north as Tel Aviv, and two people were wounded by shrapnel.

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An Israeli Iron Dome air defence system missile is seen intercepting rockets fired from Gaza (Ariel Schalit/AP)

Prime Minister Benjamin Netanyahu told a special Cabinet meeting that Israel has no interest in sparking a wider confrontation but warned the Iranian-backed Islamic Jihad that Israel will keep pounding them until the rockets stop.

“They know we will continue to strike them without mercy,” Mr Netanyahu said. “They have one choice: either stop these attacks or absorb more and more blows.”

Gaza’s Hamas rulers have yet to enter the fray but could be drawn in if the clashes drag on for an extended period or the Palestinian death toll rises significantly.

Palestinian officials reported 26 dead from Israeli air strikes, including at least 16 militants. Five civilians, including a woman, boys ages 17, 16 and seven, were among the dead.

Jonathan Conricus, an Israeli military spokesman, said the army was trying to limit its activities to Islamic Jihad military targets in the hope of keeping Hamas on the sidelines and preventing a serious escalation.

“However, it’s very clear that if there will be Israeli casualties, the situation would change drastically and we would be forced to respond in a different manner,” he said.

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Cars were destroyed in southern Isreal by a rocket fired from Gaza (Ariel Schalit/AP)

UN Middle East envoy Nickolay Mladenov said negotiators are “working to urgently de-escalate” the fighting.

In a statement released in Cairo, where he was to meet President Abdel-Fattah el-Sissi as part of efforts to broker a ceasefire, Mr Mladenov said he was “very concerned about the ongoing and serious escalation” of violence.

Egypt frequently mediates between Israel and Gaza militants but Islamic Jihad has rejected the efforts, with spokesman Musab al-Berim saying the group’s priority is to “respond to the crime and confront the Israeli aggression.”

The French Foreign Ministry urged restraint by both sides, saying it deplores the escalation of tensions and condemns the rocket fire toward Israel.

Egypt, which frequently mediates between Israel and Gaza militants, has been working to de-escalate tensions, according to Cairo officials.

The Islamic Jihad rejected the efforts, with spokesman Musab al-Berim saying the group’s priority is to “respond to the crime and confront the Israeli aggression”.