A ceasefire in the Gaza strip could be secured within days if the smuggling routes that supply arms and money to Hamas can be blocked off, Tony Blair said today as Israel moved its forces deeper into southern Gaza.

But the entire region should brace itself for a “protracted campaign” if the border between the Gaza strip and Egypt - through which Hamas militants are supplied - is not secured, Mr Blair warned.

Israel today demanded that Hamas be prevented from rearming as a main condition of any ceasefire. Mark Regev, a spokesman for Ehud Olmert, Israel's Prime Minister, said: "That is the make-or-break issue."

Mr Blair, the Middle East envoy, said Hamas and Egypt are in contact over the supply routes that run through the Egyptian border into the Palestinian enclave and Cairo is prepared in principle to take action in order to dry up the flow of missiles and guns into the area.

A delegation from Hamas was today in Cairo to discuss a ceasefire with Israel as proposed by Egypt. The talks with the Palestinian delegation, headed by Emad al-Alami and Mohammed Nasr from Hamas’s Syrian-based political leadership, represent the first such contact since fighting began.

“We will speak with Egyptian leaders about the aggression in Gaza,” Mr Nasr said. “Our position is clear: end the aggression, withdraw (Israeli forces) from Gaza, open the crossing points, especially Rafah, with a total lifting of the blockade."

The Hamas delegation was to meet Egyptian intelligence officials, headed by Omar Suleiman, a security official said. “We asked for a Hamas delegation with capability and authority to be sent to examine how a ceasefire can be achieved,” Ahmed Abul Gheit Egyptian Foreign Minister, was quoted as saying in the state-owned Al-Ahram daily.

The destruction of Egypt-Gaza tunnels around Rafah is a key Israeli objective in the war, aimed at preventing Hamas being able to re-arm with rockets.

Tunnels are however also a conduit for food supplies and basic needs, such as medicines, for many of the 1.5 million people in the territory which has been under tight Israeli blockade for more than 18 months.

The casualty toll escalated after a further night of fierce and increasingly chaotic battle which saw Israel intensify its ground offensive. Three Israeli soldiers were killed and 30 wounded in a “friendly fire” incident, when the building they were occupying was hit by one of their own tanks. The Israelis today moved troops into Khan Younis in southern Gaza widening the ground assault it launched four days ago after a week of air strikes failed to stamp out cross-border rocket fire.

While international discussions to reach a cessation of violence continued, an Israeli air strike killed three Palestinians in a United Nations-run school where people had sought refuge from the fighting, medical officials said.

Israel said it had killed 130 Hamas fighters since it launched the ground offensive on Saturday night, as the Islamist guerrillas fought pitched street battles using mortars, rockets grenades and small arms. The conflict has so far claimed more than 500 lives – a quarter of them civilians according to the UN.

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