Israel has briefly delayed its all-out assault on the heart of Gaza’s population centres because it believes that local leaders of Hamas have been shocked by the ferocity of Operation Cast Lead and want to end the fighting.

Ehud Olmert, the Israeli Prime Minister, remains determined to launch “phase three” of the operation if necessary but hopes that the prospect of Israeli troops advancing with overwhelming firepower into Gaza’s most built-up areas will deepen the tensions emerging within Hamas and force it to accept Egypt’s ceasefire plan.

Israeli officials and commentators seized on a speech that Ismail Haniya, Hamas’s political leader in Gaza, broadcast from an unknown location on Monday. Although his rhetoric was defiant, newspapers said he looked frightened and despairing. He stated: “We aren’t closing the door to dialogue . . . Hamas will co-operate with any initiative that will bring about an end to the aggression, will bring about an \ withdrawal and will pave the way to opening the border crossings and removing the siege. We will relate to any such initiative positively, openly and responsibly.”

Amos Gilad, Israel’s chief negotiator, has stayed away from talks in Egypt until the Hamas position becomes clearer but the Defence Ministry announced last night that he would go tomorrow for “decisive” talks on a ceasefire.

A senior Israeli military intelligence official said that Khaled Mashal, the exiled Hamas chief in Damascus, and the group’s Iranian and Syrian backers were determined that Hamas should keep fighting. He claimed, however, that the movement’s leaders in Gaza had been so shaken by the offensive that they wanted it to end swiftly. Hamas’s fighters were dispirited, the official added, and hundreds had been killed. They were launching fewer than 30 rockets a day, compared with 70 or 80 when the war started. Increasingly they were having to fire them from built-up areas, and Palestinian civilians were turning on the rocket-launching teams because they knew that retaliation would follow. “The leadership in Gaza is feeling the pressure. They feel they have to do something to stop the fighting,” he said.

The Israeli claims are impossible to verify because Israel has banned foreign journalists from entering Gaza but Palestinians inside the territory called them propaganda. Hamas fighters say they are waiting for Israeli troops to venture deep into built-up areas, and last night Gazan television broadcast morale-boosting footage of their resistance.

Five Hamas negotiators from Gaza and Damascus have spent the past few days in Cairo discussing the ceasefire plan. They want an immediate Israeli withdrawal, the end of Israel’s blockade of Gaza and the opening of all crossings but Israel opposes any measure that would confer legitimacy on Hamas. Israel is demanding an end to the rocket attacks, and to weapons smuggling — mainly in the tunnels that burrow beneath Gaza’s border with Egypt. Hamas opposes the deployment of an international force on that border and particularly abhors an Egyptian proposal that the Palestinian Authority, which it expelled from Gaza in 2007, assumes that role.

Israeli troops continued to engage in fierce battles with Hamas fighters on the perimeter of Gaza City yesterday, and sources said they were seizing high-rise buildings in preparation for an assault on the centre. For Israeli troops to fight their way into the heart of that Hamas stronghold would be a different proposition, however, and would probably lead to heavy casualties shortly before Israel’s general election next month.

The Israeli media says that Ehud Barak, the Defence Secretary, and Tzipi Livni, the Foreign Minister, both privately want to end the offensive and declare victory. Mr Olmert is standing down, however, and an aide, asked if he was really prepared to launch phase three, replied: “He is threatening with a loaded gun.”

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