Israel says it is "preparing all options", including a possible ground offensive, against militants in the Gaza Strip, as air strikes and rocket attacks between the two sides continue.
Israel says it hit "40 terror sites" in Gaza on Tuesday, while some 40 rockets were fired at Israel. Israel says its operation will be open-ended.
The violence is the most intense since a 2012 war between Israel and Gaza.
Palestinian leader Mahmoud Abbas has called on Israel to stop its campaign.
Israel should "immediately stop its escalation and the raids on Gaza", Mr Abbas said in a statement published by the official Wafa news agency.
Israel says it will pursue its offensive until rocket fire stops, warning a ground operation has not been ruled out.
"We have to be prepared for that option," Israeli military spokesman Lt Col Peter Lerner told the BBC.
Lt Col Peter Lerner: Israel 'no alternative' but airstrikes
"We have to be prepared for that escalation. And indeed we are preparing. We have called up some reservists and we are taking the necessary steps around the Gaza Strip to be prepared for that option," he said.
'Hamas' homes hitAt least four people were killed in an Israeli air strike on a car in Gaza city, the BBC's Hamada Abuqammar reports. Hamas' al-Aqsa TV showed pictures of the vehicle with two bodies in pieces.
An Israeli military spokesman said: "We can't confirm number of casualties, but we can say that hits were identified."
The air strikes have taken place all along the Gaza Strip and houses have also been targeted.
The Israeli military has sent reinforcements to the frontier with Gaza 
Palestinian medics said several people were killed by an air strike on a car in Gaza City 
The Israeli military said the homes belonged to Hamas members involved in launching rockets or other militant activity.
Overnight strikes on facilities in Gaza left at least 15 Palestinians injured, Palestinian medical sources said. There have been no reports of Israeli casualties.
After a brief lull, militants continued to fire rockets at cities and towns in southern Israel on Tuesday, including Ashdod and Ashkelon.
Israel says its operation, dubbed Protective Edge, will be expanded in the coming days and that 1,500 reservists have been called up.
There have been several loud thuds in the northern Gaza Strip in the past hour as Israeli military planes hit targets here.
The biggest strikes shake the ground and send up huge plumes of smoke.
A woman ran past us with three small children - all were crying and in shock. Nearby a house had just been damaged by an Israeli air strike. Two ambulances whizzed by carrying away the injured.
"[Militants] used to launch rockets from here. [The Israeli military] targeted these houses several times," a local man told us.
It is extremely tense on the streets and most residents - observing the dawn-to-dusk fast for the Islamic holy month of Ramadan - are staying in their homes.
Outside a bomb shelter, we heard a loud, dull boom. A small crowd squinted and pointed to a puff of white smoke in the sky.
"It's an interception," said one man, suggesting that Israel's Iron Dome missile defence system had knocked a Hamas rocket out of the sky.
"I'm not happy," said another man, "because even if there's an interception, debris still falls."
At the time of the explosion, Israel's President-elect, Reuben Rivlin, was inside the underground shelter, giving a briefing.
"Is Israel preparing for war with Hamas?" I asked him.
"We are in war with Hamas because Hamas has declared war on us," he replied. "We are in war - not because of us - because of Hamas."
A little later, Mr Rivlin visited schoolchildren, taking summer classes in a fortified classroom which looked like a bunker.
"We have to hit Hamas hard," said a rabbi.
On the roof of the religious school across the road, a group of students looked out towards Gaza in the distance.
Schools and summer camps in southern Israel have been closed because of the threat of rocket fire 
Israel says its has targeted homes belonged to Hamas members involved in launching rockets 
The military wing of Hamas has vowed that Israel will pay a "tremendous price" for the air strikes The sudden escalation comes just days after talk of a possible truce between Israel and militant groups in Gaza, with each side suggesting that calm would be answered with calm.
Tensions spiked last week with the murders of three young Israelis in the occupied West Bank and a Palestinian teenager in Jerusalem.
Israel says Hamas was behind the abduction and murder of the Israeli youths - a claim it denies.
A day after their funerals, the Palestinian was abducted in East Jerusalem and murdered. Police have arrested six Jewish suspects and say it seems the 16 year old was killed because of his nationality.
In southern Israel, towns within 40km (24 miles) of Gaza have been instructed by the authorities to close schools and summer camps because of the threat of rocket-fire.
Hamas militants reportedly warned they would enlarge the radius of their targets if Israel continued its air strikes.
Israel 'ready for Gaza escalation'
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