Israeli troops and tanks moved into Gaza's second largest city, Khan Younis, for the first time today supported by intensive artillery strikes as the military pledged to press on with its attack.

The heaviest fighting has been in northern Gaza, with witnesses reporting wave after wave of bombing strikes across the north of the territory accompanied by gunfire from helicopters and artillery from land and sea. Thousands of Palestinians have been ordered to leave their homes or forced to flee the fighting.

Artillery fired from naval ships in the Mediterranean killed 10 Palestinians this morning in Deir al-Balah, in the centre of the Gaza Strip, according to Palestinian medical workers. In Shajaiyeh, east of Gaza City, Israeli troops seized control of three apartment blocks and set up gun positions on the rooftops. Residents were locked in their homes and soldiers confiscated their mobile phones, neighbours said.

In two friendly fire incidents late last night, four Israeli soldiers were killed and 24 were wounded, four seriously. Three were killed when they were accidentally hit by an Israeli tank shell. The casualties were the most serious suffered by Israeli forces since they began their ground offensive on Saturday night, and came when the tank mistakenly fired on a building where the soldiers had taken positions. A paratroops officer was also killed by Israeli fire late yesterday.

Israel's defence minister, Ehud Barak, said troops had not finished their operation despite mounting Palestinian casualties and growing international calls for a ceasefire.

"Hamas has so far sustained a very heavy blow from us, but we have yet to achieve our objective and therefore the operation continues," Barak said.

The Israeli foreign minister, Tzipi Livni, said the offensive was intended to change permanently the shape of Israel's conflict with Hamas. "When Israel is targeted, Israel is going to retaliate," she said. Israel has rejected calls for a ceasefire.

The International Committee of the Red Cross said Gaza was now in a "full-blown" humanitarian crisis. The ICRC head of operations, Pierre Kraehenbuehl, said the situation for Palestinian civilians was "extreme and traumatic as a result of 10 days of uninterrupted fighting".

ICRC staff in Gaza described last night as "the most frightening of all to date" because of the ground offensive. Kraehenbuehl told journalists in Geneva the number of civilians killed or injured was increasing, and that fragile power supplies could collapse at any moment, leaving 500,000 people without clean water and at risk of disease.

Amid calls for an end to the fighting, Tony Blair, Middle East envoy for the Quartet (the US, the EU, the UN and Russia), said an immediate ceasefire was possible if arms supplies through tunnels used by Hamas militants were stopped.

"I think the position is, there are circumstances in which we could get an immediate ceasefire, and that's what people want to see," the former prime minister told BBC radio. "I think those circumstances focus very much around clear action to cut off the supply of arms and money through the tunnels that go from Egypt into Gaza."

Israel said it had bombed more smuggling tunnels across the border with Egypt in the south and hit more than 40 other sites across Gaza including buildings storing weapons and rocket-launching areas.

As Israeli troops and tanks pressed deeper into Gaza, the toll of civilian casualties rose rapidly. The UN said at least 94 Palestinians had been killed since the ground offensive began on Saturday night. In one incident yesterday a house in Zeitoun, south-east of Gaza City, was hit by tank shells killing at least nine people, including at least four children. In the Shamali district, north of the city, an Israeli bomb destroyed a three-storey house killing a family of seven, including four children.

In total, at least 550 Palestinians have died since Israel's operation began, with more than 2,500 injured. Hospitals have been overwhelmed; morgues were crowded with bodies, and injured patients had to be treated in hallways. On the Israeli side eight people, including five soldiers, have died and about 60, mostly soldiers, have been hurt.

The Israeli military said it had killed 130 "Hamas terror operatives" in the past two days, although there was no way to confirm that figure. At least 80 Palestinians have been detained, interrogated and taken into Israel.

In Gaza, Mahmoud Zahar, the most senior leader of Hamas in the territory and a hardliner in the movement, appeared on the party's al-Aqsa television station and gave a defiant speech threatening attacks not only in Gaza but elsewhere.

More than 40 were fired into southern Israel yesterday, including one that landed in an empty kindergarten, which has been closed since the conflict began, like all schools near the Gaza border. Israeli police said a total of 520 rockets had been fired in the past 11 days of fighting.

Israeli troops are now deployed in and around the major urban areas of Gaza, particularly in the north, including Beit Hanoun, Beit Lahiya and Jabaliya. They have used leaflets, telephone calls and radio announcements to order residents in many areas to leave their homes, forcing at least 15,000 Palestinians to flee to safety elsewhere. At least 5,000 are staying in 11 different UN schools and shelters.

AP - Barack Obama's appointed successor declared Tuesday he's qualified to take a seat in the Senate and said he'll go to Capitol Hill to do just that.