Israel and Hamas called a brief halt to fighting today to enable a convoy of aid to travel through a humanitarian corridor into the Gaza Strip.

Israeli military operations were paused for three hours at around 1pm (1100GMT) today to allow aid groups to start moving desperately-needed food and medicines into the blockaded territory. “The idea is for the Israeli military to lay down its weapons every day from 1pm to 4pm, starting today, in the area of the city of Gaza,” a military source said.

The lull came as the war in Gaza moved into a critical phase. The Israeli cabinet was this morning debating whether to accept a ceasefire deal being forwarded by Egypt or to escalate its offensive into an even bloodier stage of full-blown urban combat in Gaza’s teeming cities.

Diplomatic efforts have redoubled since an Israeli mortar hit of a UN-operated school in northern Gaza that was operating as a refugee shelter for Gazans displaced by 11 days of fighting. At least 42 people were killed in the explosion, medics said, triggering international outrage and calls for an independent inquiry by the United Nations.

Israel’s military said it had fired back at a Hamas mortar team that had been operating inside the shelter compound, killing two militants. Ehud Olmert, the Israeli Prime Minister, was said to be considering demanding an inquiry from the UN into Hamas’s alleged use of its installations as a cover for its militants.

The outgoing premier did say he would allow the creation of a “humanitarian corridor” to allow aid to get to 1.5 million Palestinians living under constant bombardment and who are running out of food, water, medicine and power. He had earlier declined a French proposal for a 48-hour humanitarian ceasefire, insisting – with US backing – that for any lasting truce, Hamas’ capacity to fire rockets at Israel had to be broken.

Aid groups have been unable to move goods into the blockaded strip, or to distribute what is already there, for the ferocity of Israel’s military offensive. The United Nations has labeled the situation a “humanitarian catastrophe.”

The Israeli cabinet is due to discuss an UN-backed Egyptian plan that would allow both sides to call off their forces without losing face.

The proposal would include a monitoring force— possibly Turks, who are Muslims but have good ties with Israel and are members of Nato – to prevent Hamas smuggling weapons through tunnels under the Egyptian border, and to allow the sealed-off borders between Gaza and Israel to reopen. Hamas has said ending the Israeli siege is a key to ending its rocket strikes.

Gabriela Shalev, the Israeli Ambassador to the United Nations, said, "I am sure that (Egypt's proposal) will be considered and you will find out whether it was accepted. But we take it very, very seriously."

Isaac Herzog, a member of Israel’s security cabinet, said the shocking images of the carnage at Gaza’s Fokhara school "would accelerate the diplomatic process," and that the next two days would be critical.

It was far from certain that Israel would accept the deal, however. It is crucial for the Jewish state that Hamas be prevented from restocking its arsenal of longer-range missiles, said to be supplied by Iran, which it has continued to fire in the past 11 days to strike Israeli cities, many of them coming under attack for the first time from Grad rockets with a range of around 25 miles. A medium-range rocket struck Ashkelon this morning, causing no casualties.

The latest figures from Palestinian health officials say 205 children are among some 600 Palestinians who have died in the Gaza war.

The composition and mandate of the force on the Egyptian border is also vital. Israel occupied the crossing, known as Philadelphi Road, until 2005 and used armoured bulldozers and tanks to destroy Palestinian houses used as covers for lucrative smuggling tunnels, of which there were as many as 1,000 when the latest offensive started. Even then, it could not totally choke off the smuggling.

Israel’s final decision will also rest on the military’s assessment of whether Operation Cast Lead has already seriously downgraded Hamas arsenal. Killing rank-and-file fighters is less important to Israel, which knows that there is no shortage of volunteers in Gaza ready to replace those killed in battle.

And Israel has traditionally been wary of handing its security concerns to international forces, worrying that they will not enforce them with the same ruthlessness that it employs, and also fearing that should it feel compelled to attack with tanks and war planes, it could end up killing international observers and incurring even more global opprobrium.

But there is growing pressure on Israeli leaders to come up with an exit strategy, both internationally and for domestic political reasons. Just one month before general elections, both Ehud Barak, the Labour leader and defence minister, and Tzipi Livni, the Kadima leader and foreign ministry, have seen their ratings rise on the back of a popular military campaign to stamp out years of rocket fire. Becoming bogged down in Gaza’s deadly streets, rigged with booby-traps, kidnappers’ tunnels and well manned by 15,000 die-hard Hamas fighters, would however be a huge gamble, both militarily and politically.

Separately, Israeli troops were reported to have withdrawn from the southern Gaza Strip city of Khan Younis this morning after operating there for a day. Witnesses said that dozens of tanks rumbled out of the city in the pre-dawn hours and went back into Israel.

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