By Nidal al-Mughrabi and Jeffrey Heller
GAZA/JERUSALEM (Reuters) - Israel intensified its land offensive in Gaza with artillery, tanks and gunboats on Friday and warned it could "significantly widen" an operation Palestinian officials said was killing ever greater numbers of civilians.
Palestinian health officials said 35 Palestinians, including a baby, four children and a 70-year-old woman, had been killed since Israel sent ground forces on Thursday into the densely-populated enclave of 1.8 million Palestinians.
The Israeli military said it killed 17 Palestinian gunmen while another 13 surrendered and were taken for questioning after the infantry and tank assault began in the Islamist Hamas-dominated territory.
One Israeli soldier was killed and several others were wounded in the Gaza Strip operations, in which some 150 targets, including 21 concealed rocket launchers and four tunnels, have been attacked, according to the military.
U.S. President Barack Obama said on Friday he had spoken to Israeli Prime Minister Benjamin Netanyahu, underscoring the U.S. support for Israel to defend itself but raising concerns about consequences of wider conflict.
The Israeli land advance followed 10 days of barrages against Gaza from air and sea, hundreds of rockets fired by Hamas into Israel and failed attempts by Egypt, a broker of ceasefires in previous Israeli-Palestinian flare-ups, to secure a truce.
A French diplomatic source said that France had asked the Gulf Arab state of Qatar, which has close links with Hamas, to use its influence with the group to reach a ceasefire.
Gaza residents said Israeli forces has moved several hundreds metres (yards) into the north of the enclave and their deployment in the south of the territory was slightly deeper.
Rocket salvoes, many of them intercepted by the Iron Dome anti-missile shield system, continued on Friday against southern Israel and the Tel Aviv metropolitan area, police said, causing no casualties.
"We chose to start this operation after we exhausted other options and reached the conclusion that without it we could pay a much higher price," Netanyahu told reporters before a special cabinet session at Tel Aviv military headquarters. "The main goal is to restore quiet.
"My instructions...to the Israeli army, with the approval of the security cabinet, is to prepare for the possibility of a widening, a significant widening of the ground operation."
He did not say what form a broadened offensive might take. Israel says its forces have focused so far on seeking out tunnels Palestinian militants might use for cross-border raids and moving weaponry.
One such infiltration was narrowly thwarted on Thursday, with the army saying it had repelled 13 Hamas gunmen after they emerged from a tunnel close to an Israeli farming community.
To back up regular forces, Israel said it was calling up 18,000 military reservists, adding to 30,000 already mobilised.
Hamas spokesman Sami Abu Zuhri responded with defiance to the Israeli escalation: "Netanyahu is killing our children and will pay the price. The ground invasion doesn't frighten us and the occupation army will sink in Gaza's mud."
Hamas wants Israel and Egypt, whose military-backed government is at odds with the Palestinian Islamists, to lift border restrictions that have deepened Gaza's economic hardship and unemployment.
In all, 268 Palestinians, most of them civilians, have been killed since the fighting began on July 8, and it has also destroyed hundreds of homes, Gaza officials said. There have been two Israeli fatalities - the soldier and a civilian, who was killed by a rocket. More than 100 rocket bursts a day at southern Israel and the heartland Tel Aviv area have sent hundreds of thousands dashing for shelters.
Hamas said its men were hitting Israeli tanks with mortar rounds and setting off bombs against troops crossing the sandy frontier under smokescreens.
"It was a loud night. The armed men clashed with the tanks that advanced from northern side of the town for about 300 meters," said Amer Yamen, 37, a resident of Beit Hanoun near the barbed-wire border with Israel.
Dozens of Palestinian families, forewarned by evacuation notices Israel had disseminated with leaflet drops and automated phone messages, fled toward the interior, leaving empty streets.
In the southern Gaza town of Rafah, near the Egyptian border, Israeli tanks rolled into its abandoned airport and fired smokescreen shells, witnesses said.
An Israeli tank shell hit the upper floor of a hospital in Beit Hanoun, at the north end of Gaza, but no one was hurt, medical officials said. Hamas said its fighters had repelled Israeli forces in the town, wounding seven soldiers.
Though they are die-hard enemies, Israel says it does not intend to topple Hamas, the dominant Islamist force in Gaza.
The current warfare has been the worst between Israel and Palestinians in two years. The Vatican said Pope Francis telephoned Israeli President Shimon Peres and West Bank-based Palestinian President Mahmoud Abbas on Friday to express his "very grave concerns" over the conflict.
"A small group of fanatics are the cause of suffering in Gaza. Israel is doing everything to lower the flames and minimise civilian casualties," Peres replied, according to statement from the president's office. Abbas, who held a prayer for peace with Peres at the Vatican last month, told the pontiff he was "exerting all required effort, together with Egypt and all other parties to halt the bloodshed and relieve people's suffering", according to the official Palestinian news agency WAFA.
Obama said he reaffirmed to Netanyahu strong U.S. support for its ally Israel but that he "also made clear the United States ... and our allies are deeply concerned about the risks of further escalation and the loss of more innocent life.
"We are hopeful that Israel will continue to approach this process in a way that minimizes civilian casualties," Obama told reporters at the White House. U.N. Secretary-General Ban Ki-moon, speaking after the announcement of the ground assault, implored Israel to do more to stop Palestinian civilian deaths. German Chancellor Angela Merkel, voicing support for Israel, said there was a "new quality" to weapons used by Hamas against it, an apparent reference to longer-range rockets. "Both sides must accept painful compromises but we stand by the side of Israel when it comes to self-defence," she said at a news conference in Berlin.
Hostilities were stoked by the killing of three Israeli teens in the occupied West Bank last month and the death on July 2 of a Palestinian youth in a suspected revenge murder. Israel briefly held fire on Tuesday after Egypt, which also borders Gaza, announced a truce plan. But Hamas and other militants balked, saying their conditions had been ignored, including an end to the Israeli and Egyptian blockades.
Hamas leaders have talked up their "tunnel campaign" against Israel. One publicity video showed Palestinian fighters hauling rockets through a narrow passage to load onto a launcher that appears buried in an orchard. It is then fired remotely after its mechanised cover slides open.
Israel last mounted a large-scale invasion of the Gaza Strip during a three-week war in late 2008 and early 2009 that claimed 1,400 Palestinian and 13 Israeli lives.
(Additional reporting by Noah Browning in GAZA, Stephen Brown and Annika Breidthardt in BERLIN and John Irish in CAIRO; Writing by Jeffrey Heller; Editing by Mark Heinrich)