Smoke from an Israeli bombardment rises over Gaza City on Monday. (Khalil Hamra/Associated Press)

Aid agencies resumed work in Gaza on Monday as a call-up of thousands of reservists signalled Israeli leaders could be ready to launch a stronger push within the territory.

The International Red Cross said seven truckloads of medical supplies crossed into the Gaza Strip on Monday, the 17th day of the Israeli military campaign. Officials said they'll distribute the supplies to hospitals overwhelmed by patients and running short on fuel.

The United Nations Relief and Works Agency (UNRWA) delivered food to about 10,000 people on Sunday after more than 50 supply trucks were allowed to cross the borders, but spokesman Johan Eriksson warned the humanitarian situation is "extremely dire."

The World Food Program handed out 1,200 monthly food rations to people in Gaza and 1,400 emergency bread packages Sunday, said spokeswoman Emilia Casella. But the agency has been unable to reach many people who need food, she said.

The UN suspended aid deliveries last Thursday after supply and medical convoys were attacked, killing two drivers. The following day, the agency said it had received assurances from Israel that UN workers would be better protected.

Eriksson said Israel's daily three-hour lull in fighting is of "little significance" to aid groups because it doesn't give supply vehicles enough time to complete their deliveries.

Hamas homes targeted

Warplanes continued to pound targets in Gaza on Monday, including the homes of Hamas leaders, and Israeli navy gunboats fired more than 25 shells at Gaza City, setting fires and shaking office buildings, according to the Associated Press. At least six Palestinians were killed in Monday's fighting.

Israel's military said 16 Hamas rockets landed inside Israel on Monday, including one that fell near the southern town of Kiryat Gat but caused no casualties.

Gaza residents reported tank shelling after dark.

Around 870 Palestinians have been killed since Israel launched its offensive on Dec. 27 to halt rocket fire from Gaza into southern Israeli towns. Thirteen Israelis, including 10 soldiers, have died.

The leader of Hamas in Gaza appeared on radio and television Monday predicting that a Palestinian victory was "at hand."

"After 17 days of this mad war," Ismail Haniyeh said, "Gaza will not be broken and Gaza will not collapse."

On Sunday, Israeli ground forces advanced deep into Gaza's most populated area. Tanks rolled into residential neighbourhoods and infantry attacks heightened in streets and buildings while Hamas militants continued to fire rockets into southern Israel.

The Israeli military has said Hamas fighters are wearing civilian clothes and endangering civilians by operating out of heavily populated residential areas.

Maj. Avital Leibovich, an army spokeswoman, said residential neighbourhoods in Gaza are riddled with booby traps and explosives, and in some cases dummies simulating militants are placed at apartment entrances and rigged to explode if soldiers approach.

The army "is advancing more into urban areas," said Leibovich.

"Since the majority of the Hamas militants are pretty much in hiding in those places, mainly urban places, then we operate in those areas."

With the injection of thousands of reservists, speculation mounted that Israel was set to expand the operation. The reserve units have been taking over areas cleared out by the regular troops, allowing those forces to push forward toward new targets.

But despite the call-up of reservists, Israeli leaders have indicated they are close to achieving their objectives.

Working hard for ceasefire: Tony Blair

Meanwhile, special Mideast envoy Tony Blair said on Monday that elements are in place for a ceasefire.

The former British prime minister is in Cairo where he met with Egyptian President Hosni Mubarak following meetings in Israel.

He said that "the elements of an agreement for the immediate ceasefire are there," adding that they are being worked on "very hard."

In an email message to the Associated Press, Hamas leader Ismail Radwan said his group would not consider a ceasefire before Israel stops its attacks and pulls back from Gaza. He also demanded the opening of all border crossings, emphasizing the Rafah crossing with Egypt.

Blair said that any plan to end fighting must also halt weapons smuggling to Hamas and open Gaza's borders.

The Czech Republic, which currently holds the rotating presidency of the European Union, proposed holding an international donors' conference for Gaza when the hostilities end.

"Right now is the moment to seriously consider steps to be taken as soon as a ceasefire is reached," Czech Foreign Minister Karel Schwarzenberg said in a statement.

Canada sole dissenting vote

Also Monday, the UN Human Rights Council adopted a resolution that condemns the Israeli military operation and demands Israel end its attacks.

The council also agreed to send a fact-finding team to investigate alleged human rights violations in Gaza.

Canada was the only country that voted against the non-binding resolution. Thirteen countries abstained from voting on the resolution, which passed with 33 nations in favour.

The council has been controversial since its inception in 2006 for granting membership to countries with poor human rights records, including Cuba, China, Pakistan, Russia and Saudi Arabia.

More condemnation of Israeli actions came Monday in a statement from the government of Saudi Arabia.

"The extermination Israel is launching upon the Palestinian people in Gaza has denuded Israeli leaders of humanity and places their policies in the ranks of racist extermination."

With files from the Associated Press