The fate of Alan Johnston, the BBC journalist kidnapped in Gaza City three months ago, hung in the balance last night as Hamas claimed to be close to securing his freedom while his kidnappers threatened to kill him.

Throughout the day, spokesmen for Hamas suggested that a deal with the Army of Islam was imminent, and that Johnston could be freed within hours.

But last night, in a video broadcast by al-Jazeera, a masked spokesman for Army of Islam, flanked by gunmen carrying Kalashnikov rifles and rocket-launchers, denied that any deal had been reached. He threatened to kill Johnston if his group’s demands were not met and if Hamas sought to free him by force. “If we do not reach an agreement and the situation worsens for us, we will have to turn to God and have no choice but to slit the throat of the journalist,” he said.

It was clear that Hamas’s decisive victory over Fatah in the Gaza Strip last week had radically changed the dynamics behind Johnston’s kidnapping, and propelled the 97-day saga towards its endgame.

The Army of Islam is an offshoot of the powerful Dagmoush clan, which is renowned for extortion, smuggling, arms dealing and the ruthless dispatch of rivals, and has been dubbed the “Sopranos of Gaza City”.

The clan has long been demanding that Hamas turn over the gunmen who shot two of its members last December, and is thought to have snatched Johnston for use as a bargaining chip. He was almost certainly being held in the heavily fortified Sabra district of Gaza City, which is the clan’s stronghold.

With Hamas suddenly the dominant force in Gaza, determined to impose order and anxious to improve its international standing, the clan appeared to be under intense pressure to release Johnston or engage in a violent confrontation with Hamas during which their hostage could be killed.

A deal still looked the more likely outcome last night. A senior member of Izzedien al Qassam, the armed wing of Hamas, told The Times that negotiations for the release were in their final stages. The official, who has been involved in the negotiations, claimed that Mumtaz Dagmoush, the clan’s 28-year-old leader, was offering to surrender his captive in return for a promise of complete amnesty for himself and his henchmen. Hamas had refused, and was instead demanding the handover of two clansmen accused of killing its own members. It has dropped its demands for 18 others.

Sami Abu Zuhri, a spokesman for Hamas in Gaza, said “intensive efforts” were being made to free Johnston and that there were “encouraging indicators that he will be released in the near future”. Other Hamas sources dismissed the statement by Army of Islam last night as mere bluster, and claimed that most of Mr Dagmoush’s fighters would not back him in a confrontation with Hamas.

An outright battle could be extremely bloody, and put Johnston in great danger. Hamas fighters showed last week how well-trained and well-armed they are, while Sabra is patrolled by heavily armed members of the Dagmoush clan and protected by barricades of rubble, burnt-out cars and concrete blocks.

A Hamas gunman approached by The Times just outside those barricades said that he was itching to launch a long-planned raid to free the journalist. “We just hope and pray Mumtaz Dagmoush says no, he won’t do a deal over Alan,” he said as he cradled a Kalashnikov on his knee. “If they refuse to hand him over, we’ll massacre them. They think they’re so powerful, but we really want to drag their noses through the mud.”

Abu Obeida, a Hamas spokesman, told reporters that all options were open, though he stressed that Hamas wanted to resolve the case “in a way that protects the safety and security of the kidnapped journalist”. Another Hamas official told The Times: “We believe our decisive action against Fatah these last few days has shown them what happens to people who oppose our will.” A third official said of Mr Dagmoush: “If he fights us, he has zero chance of survival.”

Johnston has been held longer than any other Westerner in Gaza. He was snatched at gunpoint from his rented car as he returned from his office to his beachfront flat shortly after 5pm on March 12. He was the only Western journalist based full-time in Gaza, one of the world’s most dangerous postings. He was just three weeks from finishing a three-year stint, during which he had courageously chronicled the suffering of the 1.5 million Palestinians who live in the narrow, fenced-in sliver of land that is the Gaza Strip.

During the subsequent three months there has been a worldwide campaign for his release. More than 160,000 people have signed an on-line petition demanding Johnston be freed. Leaders of the United Nations, the European Union, Russia, Hamas, Fatah, the Arab League, the Iranian regime and numerous international media associations, including Israeli and Palestinian journalists, have condemned his kidnapping. Rallies have been held in capitals around the world. The BBC organised days of action and weekly vigils. Family, friends and colleagues marked his 45th birthday last month with emotional messages of support and vigils in cities as far apart as Moscow, Hong Kong and Tehran. The London Press Club named Mr Johnston Broadcast Journalist of the Year.

The BBC and the Foreign Office refused to discuss their efforts to free Mr Johnston, arguing that they did not want to put him in deeper danger. But it is known that Cobra, the government’s inter-departmental crisis committee, met regularly on the issue, and that Richard Makepeace, the British consul-general in Jerusalem, twice met Ismail Haniya, the newly-sacked Palestinian Prime Minister, despite the Government’s ban on contacts with Hamas.

Last Friday, following Hamas’s defeat of Fatah, Mr Haniya told The Times: “From now on there will be one legitimate armed force. We will bring discipline and law to Gaza. It will thus be easier to gain the liberation of the British journalist Alan Johnston. His kidnappers will listen to us more closely.”

It has all been deeply traumatic for Mr Johnston’s elderly parents, Graham and Margaret, who live in the tiny Highland community of Lochgoilhead, Argyll. In April an unknown group called the Tawhid and Jihad Brigades issued a hoax statement claiming to have killed their son.

In May the real kidnappers identified themselves when a group calling itself Jaish al-Islam — the Army of Islam — published a picture of Mr Johnston’s BBC identity card. The group demanded that Britain release Islamic prisoners including Abu Qatada, the radical Islamic cleric who has been held in custody since 2005 for his alleged links to al-Qaeda. A Foreign Office spokeswoman said that the Government could not countenance such demands.

On June 1 the Army of Islam posted a video on the internet showing the first pictures of Mr Johnston since his abduction. He said that he was being treated well and was in good health, called for an end to western sanctions against the Palestinian government and decried both the “failed invasion” of Iraq and the “terrible situation” in Afghanistan.

Mr Johnston’s parents said that the video gave them renewed hope that their “living nightmare” was coming to an end.

Many appeals

March 12 First reports that Alan Johnston has been kidnapped in Gaza City

March 13 The Hamas-led Palestinian Administration says he has been taken by a “well-known” group that wants a “cheap reward”

March 19 His father, Graham, appeals for his son’s release. BBC says it has assurances that he is unharmed

March 20 Margaret Beckett, the Foreign Secretary, says Government is “using every channel and opportunity” to secure his release

April 2 Palestinian journalists hold three-day protest strike

April 4 Claims made that the powerful Doghmush clan took Mr Johnston. Fears of antagonising the heavily armed family

April 5 General Richard Makepeace, the British Consul, meets Ismail Haniya, the Palestinian Prime Minister

April 8 The Archbishop of York, Dr John Sentamu, uses his Easter sermon to call for his release

April 9 Vigil outside the BBC in London to mark four weeks since kidnap

April 12 Mark Thompson, BBC Director-General, appeals for him to be released immediately and unharmed; flies to the Palestinian territories to meet President Abbas, who says Johnston is safe and well

April 15 The Brigades of Tawhid and Jihad, a previously unknown Palestinian group, claims it has killed Mr Johnston

April 19 President Abbas says his intelligence services have confirmed he is alive

April 25 Dozens of foreign and Palestinian journalists hold demonstrations on both sides of Israel’s border with the Gaza Strip

May 2 The Palestinian Prime Minister says his Government held back, at Britain’s request, from raiding the hide-out where the journalist is being held

May 9 Tape purportedly from Johnston’s kidnappers sent to al-Jazeera TV

May 12 Al-Jazeera broadcasts a direct appeal from Archbishop of York

May 17 Government holds talks with radical cleric Abu Qatada over whether he could make an appeal for the release of Johnston

June 1 Video of Johnston is posted on the internet by the Army of Islam group

June 15 Hamas calls for his immediate release

June 16 Captors agree to release him within 24 hours

Times Recommends

• No cause for celebration in crushed Sarajevo
• Jazz funeral for the final victims of Katrina
• French fined for 'insulting' civil servants