Israel began scaling back its forces in Gaza but pulled out of cease-fire negotiations and warned that its military offensive might continue beyond the mission of plugging up Hamas militants' cross-border tunnels.
Two days after the disappearance and presumed capture of an Israeli officer during a militant ambush that shattered a U.S.-brokered truce, Israel announced Sunday that the officer had been killed.
In some urban areas of Gaza on Saturday, witnesses saw Israeli tanks pulling back toward the border. The military gave residents who had fled its shelling of Beit Lahiya, in northern Gaza, the all-clear to return. A spokesman said some troops were leaving the Palestinian enclave altogether.
Rather than ending the 26-day-old operation, however, the movements mark a regrouping of forces as Israel's leadership, divided over how to deal with Hamas, decides its next step. The Islamist group, which governs Gaza, threatens the Jewish state with rocket fire and sneak attacks through the tunnels.
Defense Minister Moshe Ya'alon said the army would soon complete its goal of destroying more than 30 tunnels.
Officials said troops would then pull back from densely populated urban areas, where artillery and tank assaults have killed hundreds of Palestinian civilians and drawn strong international criticism.
Prime Minister Benjamin Netanyahu said the military, after plugging up the tunnels, "will prepare for continuing action according to our security needs."
"We promised to return quiet to Israel and that is what we will do," Mr. Netanyahu said in a televised speech. "We will continue to act until that goal is reached, however long it will take and with as much force as needed."
Hamas "will pay an intolerable price" if it keeps fighting, he said.
Hamas spokesman Fawzi Barhoum said: "Netanyahu's speech reflects his own crisis, and the resistance will continue until it achieves its goals." Hamas says it is fighting to end Israel's crippling blockade of Gaza's borders, which is supported by Egypt.
Officials in Mr. Netanyahu's government have voiced conflicting views on how to confront Hamas, with some pushing for an all-out offensive to cripple the group's leadership. Others favor ending the offensive, keeping Gaza's border tightly restricted and mobilizing international pressure on Hamas to disarm.
Mr. Netanyahu said Israel would demand that any reconstruction of Gaza and its future development be linked to a demilitarization of the territory.
But he added that other options were being weighed.
A former Israeli security official who is close to the military said army units scattered across Gaza would finish operating against the tunnels in the coming hours, then redeploy to border areas while Mr. Netanyahu and his security advisers deliberate.
"They have three days to make a decision," the former official said.
The fighting has left more than 1,700 Palestinians dead, wide swaths of Gaza destroyed and its only power plant knocked out, Gaza's Health Ministry said. Palestinian and U.N. officials have said most of those killed were civilians. Israel has said 64 of its soldiers have died in the Gaza fighting, along with three civilians killed by rocket fire into Israel.
Last week, Israel and Hamas agreed to a 72-hour humanitarian cease-fire, followed by indirect talks in Cairo this week on a durable peace.
But the cease-fire, brokered by U.S. Secretary of State John Kerry and U.N. Secretary-General Ban Ki-moon, collapsed Friday after barely 90 minutes. On Saturday, Israel said it wouldn't send representatives to Cairo, even as Palestinian and U.S. delegates were on their way.
Israeli officials made it clear they were determined to deal with Hamas on their own terms, rather than becoming entangled in new cease-fire talks.
"The diplomatic process is stalled,'' said Mike Herzog, a former Israeli negotiator who is close to the government. "Israel is unwilling to go for so-called humanitarian cease-fires, because they have been violated six times.''
Hamas issued a statement saying it would be willing to abide by a cease-fire agreement if Israel did too. It said Israeli forces had moved troops and heavy machinery into Rafah and other cities early Friday and that Hamas fighters had engaged them in fighting that continued past the 8 a.m. start of the cease-fire period.
It was near Rafah that morning that 2nd Lt. Hadar Goldin, a 23-year-old infantry officer, disappeared during a battle after militants popped out of a tunnel and one detonated an explosive vest. The military said two of its soldiers had been killed and Lt. Goldin was presumed to be captured.
His fate remained a mystery through much of the weekend as Israeli forces staged a manhunt across southern Gaza and deployed heavy fire that killed scores of Palestinians. An airstrike Saturday demolished what Israel called a weapons manufacturing research center within the Islamic University, one of Gaza's two main universities.
Outside the missing officer's home in the town of Kfar Saba, hundreds of well-wishers held a round-the-clock vigil. Israelis worried openly that Hamas was holding the officer and had gained powerful leverage to extract concessions from Israel.
Late Saturday, members of Lt. Goldin's family made an emotional appeal, demanding there be no troop withdrawal until he was found.
Hours later, the defense minister and the chief military rabbi informed them that Lt. Goldin had been killed. A formal announcement early Sunday didn't say how he had died or whether his body had been recovered.
Nor was it clear whether he had been held captive. Hamas issued a statement Saturday saying it was unaware of the officer's whereabouts or the circumstances of his disappearance.
Diplomatic efforts to halt violence in the Gaza Strip intensified Tuesday as Secretary of State John Kerry and Egypt's Foreign Minister made a new push for a cease-fire, while the Israeli army confirmed that one of its soldiers was missing after a deadly battle earlier this week.
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