War and economic hardship loomed over Christmas celebrations across the world today, with Pope Benedict XVI pleading for an end to “hatred and violence” in the Middle East.

“Let us think also of the place named Bethlehem, of the land in which Jesus lived, and which he loved so deeply,” the pontiff said during his midnight mass Christmas homily at the Vatican.

“Let us pray that peace will be established there, that hatred and violence will cease. Let us pray for mutual understanding, that hearts will be opened, so that borders can be opened.”

But his appeal came against a backdrop of tit-for-tat strikes between Hamas militants in Gaza and Israel after the breakdown of a truce.

Tzipi Livni, the Israeli Foreign Minister, heads to Egypt today for talks with President Hosni Mubarak on the situation around Gaza. Egypt had mediated a six-month ceasefire which went into effect in June but expired six days ago.

“The main objective is to reach a durable truce,” an Israeli foreign ministry spokesman said. “If that proves impossible, all other options will be examined."

But the chances of a new ceasefire appeared slim after Hamas gunmen pounded Israel with about 70 rockets and mortars on Wednesday, the largest daily bombardment in six months. In response, Israel launched an air strike on southern Gaza aimed at rocket-firing militants that killed a Hamas fighter.

Hamas’s military wing said that Wednesday’s barrage was in retaliation for the killing of three of its members by the Israeli army on Tuesday. The army said it had fired on militants laying explosives along the Israel-Gaza border.

In Bethlehem, thousands of Christians turned out in the largest numbers since the 2000 start of the Palestinian uprising, braving the cold to bring festive cheer to the troubled region.

The Queen was due in her Christmas message to reflect on the “sombre” backdrop of economic hardship brought on by the worldwide credit crunch which has sparked recession and job losses.

“Christmas is a time for celebration, but this year it is a more sombre occasion for many,” she will say.

“Some of those things which could once have been taken for granted suddenly seem less certain and naturally give rise to feelings of insecurity."

President-elect Obama urged the American people in a holiday address to put their shoulder to the “wheel of history” to forge brighter days from the misery of economic crisis, and paid tribute to the thousands of US service personnel stationed overseas.

In Afghanistan the unrelenting conflict was underlined by the death of a Royal Marine on Christmas Eve, the Ministry of Defence said today.

The serviceman, from 42 Commando, died from enemy fire while on a mission in the Nad-e-Ali district near Lashkar Gah in Helmand province.

Commander Paula Rowe, an army spokeswoman, said: “The death of this Royal Marine is a tragic loss and coming so close to Christmas, this is particularly poignant

“Our thoughts and prayers are with his family and friends at this dreadfully sad time."