Israel declared an end to a three-day Gaza truce only hours after it began Friday, saying it fears one of its soldiers was captured as intensive shelling killed dozens of people in southern Gaza hours into the short-lived truce.
Hamas accused Israel of breaking the ceasefire as Tel Aviv said it was responding to rocket fire.
The skies over Gaza had initially fallen silent after the humanitarian truce announced overnight by U.S. Secretary of State John Kerry, the longest of several agreed since the conflict broke out on July 8.
Starting from 0500 GMT, it gave brief respite to people in the battered strip from fighting that has killed nearly 1,500 on the Palestinian side, mostly civilians, and 63 Israeli soldiers and three civilians on the other.
Within hours air raid sirens warning of rocket fire were heard on the Israeli side of the border, and heavy shelling was resumed in the southern Gaza city of Rafah, killing at least 40 people and wounding 150, medics said.
The deaths brought the total toll from 25 days of conflict to at least 1,500 Palestinians, emergency services spokesman Ashraf al-Qudra announced.
Shortly afterwards the Israeli army announced the ceasefire was over, saying it was searching for one of its soldiers feared to have been captured in the enclave.
"Our initial indications suggest a soldier has been abducted by terrorists in an incident where terrorists breached the ceasefire," army spokesman Peter Lerner said.
The humanitarian truce was over and Israeli forces were pressing their "activities on the ground," he said, before the military said two soldiers had been killed in the fighting and named the missing man as Second Lieutenant Hadar Goldin, 23.
The office of Israeli Prime Minister Benjamin Netanyahu accused Hamas and other Gaza militants of "flagrantly violating" the ceasefire.
But Hamas snapped back.
"It is the (Israeli) occupation which violated the ceasefire. The Palestinian resistance acted based on... the right to self defense," Hamas spokesman Fawzi Barhum said.
Agence France-Presse correspondents said there appeared to be fierce fighting ongoing in the vicinity of Rafah, and medics had trouble retrieving the dead and wounded.
The army warned residents of the city to remain in their homes, saying in voice messages to mobile phones it was "pursuing terrorist elements in Rafah."
Kerry had said earlier that once the ceasefire was under way, Israeli and Palestinian representatives, including from Hamas, would begin talks in Cairo on a more durable truce.
The ceasefire was a joint U.S.-U.N. initiative and was aimed at giving civilians "a much needed reprieve," the top U.S. diplomat had said.
Prior to the ceasefire deadline, Israeli tank and air fire killed 14 Palestinians in Gaza, and the army said five of its soldiers died in mortar fire near the border with the Palestinian coastal enclave.
And only minutes before the truce took effect, Palestinians had continued to fire rockets into southern Israel, with five brought down by missile defenses, army radio said.
The Israeli army said that "five soldiers were killed during operational activity along the border with the Gaza Strip when a mortar was fired at the forces."
While the ceasefire had been accepted in the name of all militant groups by Hamas, the main power in Gaza, the Islamist movement stressed it was dependent on Israel reciprocating.
Both Hamas and Israel issued statements saying they accepted the 72-hour humanitarian truce.
Hamas allies Turkey and Qatar welcomed the ceasefire.
But in a speech published after the ceasefire broke down, Saudi King Abdullah hit out at the "inexcusable" world silence over Israel's "war crimes" in Gaza.
The ceasefire had come after the U.N. Security Council expressed "grave disappointment" that repeated calls for a truce had not been heeded, and demanded a series of humanitarian breaks to ease conditions for civilians trapped in the war-torn territory.
Egypt had invited Israel and the Palestinian Authority to send delegates to Cairo for longer-term truce talks.
"Egypt emphasizes the importance of both sides committing to the ceasefire so the negotiations can take place in a favorable atmosphere," the foreign ministry in Cairo said.
The delegations were expected to start arriving in Cairo later on Friday.
Deputy Secretary of State William Burns, the number-two U.S. diplomat, was to attend in the hope of extending the truce beyond 72 hours, a senior U.S. official said.
And Palestinian President Mahmoud Abbas insisted a joint Palestinian delegation, including Hamas and the Islamic Jihad, would head to Cairo on Saturday for the talks regardless of the renewed violence.
"Abbas has formed the delegation, which will head Saturday for Cairo whatever the circumstances," his office said in a statement, giving the names of the 12-member delegation.
They included Abbas aide Azzam al-Ahmed, Palestinian Authority security head Majed Faraj, several senior Hamas officials including Mussa Abu Marzuq, and a leading member of Islamic Jihad, Ziad al-Nakhale.
The statement said they would discuss with Egyptian officials the "next steps" in trying to reach a ceasefire.
It came after the White House said there was little doubt Israeli artillery was the source of a "totally indefensible" strike on a U.N. school in northern Gaza that killed 16 people on Wednesday.
The school was sheltering more than 3,000 Palestinians made homeless by the relentless fighting.
The Israeli army has suggested the deaths may have been the result of a misfired Palestinian rocket.
Meanwhile, the Islamic Jihad said Friday it had been informed by Cairo that it is delaying talks on a long-term Gaza ceasefire, after Israel revealed one of its soldiers may have been captured.
"The Egyptians contacted the Islamic Jihad and said Israel told them that a soldier has been captured," the group's deputy leader Ziad al-Nakhale told Agence France-Presse. "The talks have been postponed."
But Hamas' deputy leader Moussa Abu Marzuq said "any operation was conducted before the ceasefire started."
He told AFP that any announcement of a soldier's capture must come from the group's military wing in Gaza, but he did not deny that Hamas militants abducted the soldier.
Abu Marzuq said Hamas was still prepared to abide by the 72-hour truce if Israel was willing to do so.
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