* Foreign airlines shun Tel Aviv over rocket risk
* Gaza death toll hits 687; 3 more Israeli soldiers die
* UN rights chief warns of possible war crimes
* Diplomatic efforts pursued on many fronts (Updates with Hamas leader Meshaal's comments, Palestinian protester dies in West Bank)
By Nidal al-Mughrabi and Crispian Balmer
GAZA/JERUSALEM, July 23 (Reuters) - Gaza fighting raged on Wednesday, displacing thousands more Palestinians in the battered territory as U.S. Secretary of State John Kerry said efforts to secure a truce between Israel and Hamas had made some progress.
In a blow to Israel's economy and image, American aviation authorities extended a ban on U.S. flights to Tel Aviv for a second day, spooked by rocket salvoes out of the Gaza Strip, with many other global airlines also avoiding the Jewish state.
Hamas leader Khaled Meshaal, speaking in Qatar, praised the group's fighters, whom he said had made gains against Israel and said he supported a humanitarian truce but a ceasefire would only be acceptable in exchange for easing Gazans' plight.
"Let's agree first on the demands and on implementing them and then we can agree on the zero hour for a ceasefire... We will not accept any proposal that does not lift the blockade... We do not desire war and we do not want it to continue but we will not be broken by it," he said.
Adding to the pressure on Israel, U.N. High Commissioner for Human Rights Navi Pillay said there was "a strong possibility" that it was committing war crimes in Gaza, where 687 Palestinians, mostly civilians, have died in the fighting.
She also condemned indiscriminate Islamist rocket fire out of Gaza and the United Nations Human Rights Council said it would launch an international inquiry into alleged violations.
Israel denied any wrongdoing. "Get lost," Justice Minister Tzipi Livni said on her Facebook page in response to the investigation.
Kerry met Palestinian President Mahmoud Abbas, U.N. Secretary General Ban Ki-moon and a grim-faced Netanyahu on Wednesday. He was due to return later in the day to Egypt, which shares a border with Gaza and has mediated with Islamist Hamas.
"We have certainly made some steps forward. There is still work to be done," said Kerry, on one of his most intensive regional visits since the peace negotiations he had brokered between Netanyahu and Abbas broke down in April.
Kerry has been working through Abbas, Egypt and other regional proxies because the United States, like Israel, shuns Hamas as a terrorist group. Hamas brushed off the U.S. diplomat's appeal, saying it would not hold fire without making gains.
"Our interest and that of our people is that no agreement should be made before the conditions of factions of resistance are met," Hamas spokesman Sami Abu Zuhri said.
Israel launched its offensive on July 8 to halt rocket salvoes by Hamas and its allies, which have struggled under an Israeli-Egyptian economic blockade on Gaza and angered by a crackdown on their supporters in the nearby occupied West Bank.
After aerial and naval bombardment failed to quell the outgunned guerrillas, Israel poured ground forces into the Gaza Strip last Thursday, looking to knock out Hamas's rocket stores and destroy a vast, underground network of tunnels.
"We are meeting resistance around the tunnels ... they are constantly trying to attack us around and in the tunnels. That is the trend," Israeli military spokesman Lieutenant-Colonel Peter Lerner said on Wednesday.
MILITARY LOSSES RISE
Israel announced that three of its soldiers were killed by explosive devices on Wednesday, lifting the army death toll to 32. Three civilians have also been killed in rocket attacks out of Gaza, including a Thai laborer hit on Wednesday.
The military says one of its soldiers is also missing and believes he might be dead. Hamas says it has captured him, but has not released a picture of him in their hands.
Already hurt by mass tourist cancellations, Israel faced increased economic pressure after the U.S. Federal Aviation Administration (FAA) took the rare step on Tuesday of banning flights to Tel Aviv, renewing the order on Wednesday.
Many other foreign carriers, on heightened alert after a Malaysian airliner was shot down over a combat zone in Ukraine last week, followed suit. Israeli carriers continued to operate.
"Hamas's success in closing the Israeli air space is a great victory for the resistance, a terrible failure for Israel that wrecks the image of Israeli deterrence," said Hamas's Abu Zuhri.
The Tel Aviv stock exchange and Shekel were flat, with traders showing little concern about the flight stoppages.
Clouds of black smoke hung over Gaza, some 65 km (40 miles) south of Ben Gurion, with the regular thud of artillery and tank shells filling the air, sending thousands of civilians fleeing from the town of Beit Hanoun in the northern Gaza Strip.
"This is not war, this is annihilation," said 17-year-old Hamed Ayman. "I once dreamt of becoming a doctor. Today I am homeless. They should watch out for what I could become next."
Palestinian medics said two worshippers were killed and 30 wounded in an attack on a mosque in the heart of the densely populated Zeitoun neighborhood in eastern Gaza City.
A Palestinian protester died after a confrontation with Israeli forces in the West Bank.
And in southern Abassan and Khuzaa villages, residents said they were besieged by Israeli snipers who wounded two Palestinians as they tried to emerge from hiding with white flags in hand.
The Israeli army also seized Wafa hospital in eastern Gaza, saying it had been used to shelter Hamas fighters - a regular complaint from the military. Patients were removed ahead of time after receiving warnings of the pending assault.
Israel named four commanders of Hamas ally the Islamic Jihad, that it said it had killed in recent days.
Egypt has tried to get both sides to hold fire and then negotiate terms for protracted calm in Gaza, which has been rocked by regular bouts of violence since Israel unilaterally pulled out of the territory in 2005.
Hamas, which refuses to recognize Israel's right to exist, has balked at Cairo's original proposal, wanting its conditions to be met in full before any end to the conflict.
These demands include the release of hundreds of Hamas supporters recently arrested in the nearby West Bank and an end to the Egyptian-Israeli blockade of Gaza, which has stymied the economy and made it near impossible for anyone to travel abroad.
The war is extracting a heavy toll on impoverished Gaza, with Palestinian officials saying that at least 475 houses had been totally destroyed by Israeli fire and 2,644 partially damaged. Some 46 schools, 56 mosques and seven hospitals had also suffered varying degrees of destruction.
"There seems to be a strong possibility that international humanitarian law has been violated, in a manner that could amount to war crimes," the U.N.'s Pillay told an emergency session at the UN Human Rights Council (HRC) in Geneva.
Netanyahu reacted furiously to news of the planned U.N. investigation, aware of the damning report into Israel's 2008/09 Gaza operation, which killed more than 1,000 Palestinians.
"The decision today by the HRC is a travesty," he said in a statement. "The HRC should be launching an investigation into Hamas's decision to turn hospitals into military command centers, use schools as weapons depots and place missile batteries next to playgrounds, private homes and mosques."
(Additional reporting by Arshad Mohammed, Maayan Lubell and Ori Lewis in Jerusalem, Noah Browning and Nidal al-Mughrabi in Gaza, Nidal al Ali Sawafta in Ramallah, Amena Bakr in Doha and Stephanie Nebehay in Geneva; Writing by Crispian Balmer; Editing by Anna Willard, Giles Elgood and Louise Ireland)
BEFORE YOU GO
08/08/2014 2:47 PM EDT
White House Concerned By Renewed Fighting
The White House on Friday urged Israel and the Palestinians to resume talks and do what they can to protect civilians after Egyptian-mediated negotiations failed to extend a ceasefire and rocket fire resumed.
"The United States is very concerned about today's developments in Gaza," White House spokesman Josh Earnest told reporters.
"We condemn the renewed rocket fire and we are concerned about the safety and security of civilians on both sides of that conflict," he said.
08/08/2014 1:42 PM EDT
Official: 5 Palestinians Killed In Gaza
Five Palestinians, including a 10-year-old boy, have been killed in Israeli airstrikes on Gaza since a ceasefire fell apart on Friday, a Palestinian medical official reported to Agence France Presse.
Meanwhile, the Israeli army said Palestinian militants fired 35 rockets into Israel on Friday, injuring a soldier and a civilian.
The father of a ten-year old Palestinian boy, who was killed in an Israeli air strike on the Sheikh Radwan neighbourhood in northern Gaza City, mourns at the city's Al-Shifa hospital, on August 8, 2014. (MOHAMMED ABED/AFP/Getty Images)
08/08/2014 9:23 AM EDT
Palestinian Delegation Says Gaza Talks Will Continue
Palestinian factions will remain in Cairo and press on with Egyptian-mediated talks despite the end of the ceasefire in Gaza, the head of the delegation, Fatah official Azzam Ahmed, said on Friday.
"We are not for escalation. We are ready to continue through our Egyptian brothers in negotiating to reach a final agreement that would return the rights to their owners," Ahmed said. "I mean here lifting the blockade of Gaza."
Ahmed said Palestinian negotiators were due to meet Egyptian intelligence officials, who have been mediating the talks, later in the day. He said Palestinian factions were united in their decision not to extend the 72-hour truce that ended at 0500 GMT and had been clear about their basic demands to end the conflict.
08/08/2014 9:13 AM EDT
Egypt: Agreement Close In Gaza Talks
Egypt called on Friday for an immediate resumption of the ceasefire in Gaza and a return to the negotiating table, saying that only a few outstanding issues remained in negotiations it was mediating between Israel and the Palestinians.
"The foreign ministry calls on all sides to rise to their responsibilities ... and to return immediately to the ceasefire commitment and exploit the opportunity available to resume negotiations on the very limited sticking points that remain in the fastest possible time," the foreign ministry said in a statement.
08/08/2014 3:58 AM EDT
Israeli Airstrikes On Gaza Resume
BREAKING: Israel says it's resumed strikes on Gaza in response to rocket fire, after end of 3-day truce.— The Associated Press (@AP) August 8, 2014
08/08/2014 3:02 AM EDT
Cease-Fire Ends With New Rocket Attacks
A 72-hour cease-fire expired at 8 a.m. today, and not long after, Gaza militants began firing rockets at Israel, The Associated Press reported.
The Israeli military said at least 10 rockets had been fired at Israel since the truce ended. Prior to the attacks, a senior official for Hamas said the militant groups would not extend the cease-fire.
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08/06/2014 2:46 PM EDT
Official: Israel Agrees To Extend Ceasefire
Israel has conditionally agreed to extend a ceasefire that ended a month of fighting in Gaza beyond a Friday deadline, an Israeli official said on Wednesday, speaking on condition of anonymity.
The official did not say for how much longer Israel had agreed to extend the truce, only that: "Israel has expressed its readiness to extend the truce under its current terms," referring to the deal brokered by Egypt that took effect on Tuesday.
Hamas had no immediate comment.
08/06/2014 2:12 PM EDT
IDF: Rocket Sirens Were False Alarm
IDF confirms rocket sirens in southern Israel were false alarm http://t.co/QN677jtlXE— Haaretz.com (@haaretzcom) August 6, 2014
08/06/2014 1:18 PM EDT
Report: Rocket Sirens Sound At Gaza Border
ABC Foreign Editor Jon Williams reports that the IDF have confirmed the rocket sirens are sounding, but are checking to see if it is a false alarm.
08/05/2014 4:20 PM EDT
Israel Arrests Kidnapping Suspect
Reuters reports that Israel has arrested one of the suspects in the kidnapping and killing of three Israeli teenagers in the West Bank in June.
Hussam Kawasme, a 40-year-old resident of the West Bank city of Hebron, was arrested on July 11 in connection with the killing of Israelis Gil-Ad Shaer, Naftali Fraenkel and Eyal Yifrah, who went missing on June 12 and were discovered dead a couple of weeks later.
Their kidnapping sparked a cycle of violence that led to the month-long conflict between Israel and Palestinian militants in the Gaza Strip.
Kawasme's arrest was made public for the first time on Tuesday in a document from an Israeli court case over whether houses belonging to him and two other suspects - who remain at large - should be destroyed as a punitive measure.
The lawyers listed as representing Kawasme were not reachable for comment.
The court document said Kawasme had admitted to helping to organize the kidnapping - securing funding from the Hamas Islamist group in Gaza and purchasing weapons which he passed on to the two other suspects who carried out the attack.
Kawasme also helped to bury the bodies of the teenagers in a plot of land he had bought a few months earlier, it said.
Israel has named the other two suspects in the case as Marwan Kawasme and Amar Abu Aysha.