Israel says "all options are on the table" for quelling rocket attacks from the Hamas-ruled Gaza Strip after three Israelis died in a rocket attack in the south and a missile fired from the Palestinian coastal territory threatened the Israeli commercial capital Tel Aviv.

Israeli forces are now amassing. Troops are moving toward the Gaza Strip and at least a dozen trucks carrying tanks and armoured vehicles were seen late Thursday moving toward the border area, while buses ferried soldiers.

Defence Minister Ehud Barak announced that he had authorized the army to draft reserve forces for possible activity in Gaza. The army said as many as 30,000 troops could be drafted.

"Let me tell you that all options are on the table," Maj. Arye Shalicar told the CBC's Derek Stoffel on Thursday. "If we need to send in ground forces or more strikes on terror activity sites or other surgical attacks on sites, we will do so until we bring quiet back to our southern region."

Israeli warplanes struck dozens of Hamas-linked targets in Gaza on Thursday, sending loud booms echoing across the narrow Mediterranean coastal strip at regular intervals, followed by gray columns of smoke. After nightfall, several explosions shook Gaza City several minutes apart, a sign the strikes were not letting up, and the military said the targets were about 70 underground rocket-launching sites.

Late Thursday, Hamas security said an Israeli navy vessel fired toward a building about 50 metres from the home of Hamas prime minister, Ismail Haniyeh. It hit an area where a generator supplies electricity for the prime minister and his neighbours in Shati, a beach-front refugee camp in Gaza City. It was not clear if Haniyeh was home at the time.

Tel Aviv residents reported hearing an explosion following an air-raid alert across the city, raising fears of a Gaza rocket strike. Israeli authorities were still trying to determine where the rocket may have landed on Thursday.

Israeli military spokesman Brig.-Gen. Yoav Mordechai said nothing landed on the ground, raising the possibility the rocket fell in the sea.

A strike on Tel Aviv would mark the first time Gaza rocket squads have reached the city, which would amount to a significant escalation of the conflict and increase the likelihood of an even tougher Israeli response.

Call for 'restraint' from Canada

Israeli Prime Minister Benjamin Netanyahu said the army was hitting Hamas hard with what he called surgical strikes, and warned of a "significant widening" of the Gaza operation. Israel will "continue to take whatever action is necessary to defend our people," said Netanyahu, who is up for re-election in January.

Netanyahu responded strongly in reaction to the three Israelis who were killed earlier in the day in the southern Israeli town of Kiryat Malachi — the first fatalities in Israel since it launched its latest Gaza operation..

"This is why my government has instructed the Israeli Defence Forces to conduct surgical strikes against the terrorist infrastructure in Gaza. And this is why Israel will continue to take whatever action is necessary to defend our people."

Officials have said Israel is prepared to broaden the offensive with a ground invasion of Gaza if necessary.

Canadian Defence Minister Peter MacKay calls the situation “very troubling.” In 2011, MacKay went so far as to say that "a threat to Israel is a threat to Canada."

In fact, the two countries have signed a memorandum of understanding covering defence and industrial initiatives, as well as information-sharing. As it is non-binding, MacKay played down the potential impact of the agreement in the current crisis.

“We have constantly tried to send a message of restraint," he told CBC chief correspondent Peter Mansbridge in an interview which aired Thursday night on The National.

"The issue around nuclear proliferation is ever present, so you have a powder keg — a number of fuses that could result in catastrophic consequences.”

Mackay said Canada would try to foster “meaningful discussions” to de-escalate the conflict. On Wednesday, the Canadian government voiced its support for Israel's actions. Rick Roth, a spokesman for Foreign Affairs Minister John Baird, said in a statement. "Far too often, the Jewish people find themselves on the front lines in the struggle against terrorism."

Also on Thursday, the Arab League Foreign ministers announced that an urgent meeting on the situation in Gaza will convene on Saturday in Cairo.

Tanks, infantry moved into southern Israel

The fighting, which began Wednesday when Israel assassinated Hamas's military chief, brought life to a standstill on both sides of the border. Gaza's streets were mostly empty as the Israeli air force continued to strike targets.

A rocket launches from the northern Gaza Strip towards Israel, where three Israelis were killed after it struck an apartment building. (Ronen Zvulun/Reuters)

"According to international humanitarian law, you're forbidden to target innocent civilians and...they are indiscriminately trying to kill the civilian population," Mark Negev, the spokesman for Netanyahu told CBC News.

"They have targeted schools, daycare centres and religious centres...They're not going for military targets."

Residents across southern Israel remained huddled indoors or close to home, ordered by authorities to remain close to a network of public bomb shelters.

"The military will continue acting to establish deterrence against Hamas and to return the calm," Barak said.

Following the assassination of Hamas mastermind Ahmed Jabari on Wednesday, Israeli tanks, gunboats and aircraft struck dozens of sites across Gaza.

Israel said Jabari's assassination was the start of a broader offensive, launched after days of rocket fire from the coastal territory. It was Israel's most intense attack on Gaza since a full-scale invasion four years ago, also in response to rocket fire.

More than 100 wounded in Gaza

At least 18 Palestinians, including seven civilians, have been killed and more than 100 people wounded on Wednesday and Thursday, according to Palestinian medical officials. Among the dead were five children.

Gaza City resident Jamal Alrozzi is holed up in his home with his wife and two children, aged 17 and 11.

"I can see the light of the bombs and the glass [shattered] around the house," Alrozzi told CBC Radio's As It Happens in an interview earlier on Thursday. He said the strikes come every minutes and occasionally, one after another.

Palestinians extinguish a fire after Israeli air strikes targeted an electricity generator that fed the house of Hamas's Prime Minister Ismail Haniyeh in Gaza City. (Majdi Fathi/Reuters)

"Gaza is a very small area, it's very crowded. Every time they strike, they are targeting people."

The last time Alrozzi left the house was late afternoon Wednesday for a brief time.

Explosions rocked Gaza throughout the day on Thursday as well. Few in the territory's largest urban area, Gaza City, came out following the call for dawn prayers, and the only vehicles plying the streets were ambulances and media cars.

Many also provided updates on their Facebook and Twitter accounts, providing news about airstrikes and rocket launches.

"Israelis were ordered to remain close to shelters or fortified rooms in their homes as air raid sirens wailed throughout the day. Police said two men and a woman died after a rocket struck their four-storey apartment building in Kiryat Malachi. A four-year-old boy and two babies were also wounded.

'There is still blood on the walls. Clearly, the people there didn't expect this.'—Sasa Petricic, Jerusalem correspondent for CBC News

The rocket landed in an area farther away from where previous rockets fired from Gaza have landed and likely caught the victims by surprise, Sasa Petricic, Jerusalem correspondent for CBC News, reported from the town.

"There is still blood on the walls," said Petricic, who went to the apartment Thursday after the attack. "Clearly, the people there didn't expect this."

In central Tel Aviv, Adrian Cisser, a 35-year-old electrician, was in a bicycle shop when an air raid siren went off

"People on the street started running," he said. "The public shelter nearby was locked so we just stayed in the shop, and two minutes after it started we heard this big bang."

'No one knows when this will end'

Hamas announced a state of emergency in Gaza, evacuating all its security buildings and deploying its troops away from their locations.

Israeli aircraft dropped leaflets on several locations in Gaza early Thursday, warning Gazans to stay away from Hamas, other militants and their facilities.

Jihad al-Masharawi, a Palestinian employee of BBC Arabic in Gaza, carries the body of his 11-month-old son Omar, who according to hospital officials was killed by an Israeli airstrike in Gaza City. (Mohammed Salem/Reuters)

Israel declared a state of emergency in the country's south, where more than one million Israelis live within rocket range, instructing people to remain close to fortified areas. School was cancelled in communities within a 40-kilometre radius of Gaza.

Israel faces a much-changed region. Following a popular uprising last year, Egypt is now governed by the Muslim Brotherhood, an ideological counterpart of Hamas. Egypt's new Islamist government has so far honoured a 1979 peace deal with Israel. But it is far cooler to Israel than ousted president Hosni Mubarak was.

On Thursday, Egypt's Islamist president, Mohammed Morsi, vowed to work to stop Israel's campaign against Hamas militants in the Gaza Strip, calling it an "unacceptable aggression" and ordering his prime minister to travel to the territory in a show of support.

Still, Morsi took a low-key tone in his first public comments on the crisis, televised on state TV during a cabinet session. He expressed support for the Palestinians in Gaza but avoided sharp condemnations of Israel and said had spoken with President Barack Obama about how "peace and security could be achieved for everyone without aggression."

With files from The Associated Press and CBC's Sasa Petricic and Derek Stoffel