Smoke rises after Israeli shelling in the Shejaiya neighbourhood during a military operation in the east of Gaza City on Wednesday. At least 17 Palestinians were killed in an Israeli airstrike on a market in Gaza City.

AFP

At least 17 people were killed in an Israeli strike on a packed Gaza market on Wednesday in a deadly raid that came as Israel was observing a four-hour humanitarian lull.

Thick black smoke billowed over the site in the war-torn Shejaiya neighbourhood as at least five ambulances raced to the scene where bodies lay strewn on the ground, an AFP correspondent said.

A bloodied, limp lifeless body lay in a pool of petrol and mud, his head crushed, one of at least 17 people who were killed. At least another 200 were wounded, medics said.

It was supposed to have been a rare pause for Gaza's battered population of 1.8mn to go out in safety to stock up on goods, and for medics to evacuate the dead and wounded.

Instead, there was further bloody mayhem with more than 30 people killed across Gaza in the first three hours of the lull alone, sending the death toll from 23 days of unrelenting Israeli attacks soaring to 1,336.

Israel had said its truce, which began at 1200 GMT, would not apply in places where troops were "currently operating," hours after the army made what it called a "significant advance" into the narrow coastal strip.

Hamas denounced the four-hour lull as a publicity stunt, saying it had "no value".

The strike on the market came hours after Israeli tank shells slammed into a UN school sheltering some 3,300 homeless Gazans, killing 16 and drawing a furious response from the UN.

"This morning a UN school sheltering thousands of Palestinian families suffered a reprehensible attack," UN chief Ban Ki-moon said on a visit to Costa Rica.

"It is unjustifiable, and demands accountability and justice."

The attack was also denounced by the White House in a carefully-worded statement which avoided mentioning Israel.

"The US condemns the shelling of a UNRWA school in Gaza, which reportedly killed and injured innocent Palestinians, including children, and UN humanitarian workers," a statement said.

"They're bombing houses, homes, schools - there's no protection," said Moin al-Athamna, one of those who had been staying at the school when the attack occurred.

Inside one classroom, two young men wearing Palestinian boy scout scarves were engaged in the grisly task of collecting body parts. Their ungloved hands were stained with blood as they picked up chunks of flesh and put them into thin plastic bags.

"They were all kids in there, young people," said Hisham al-Masri. "Why would they do this? Where can people go?"

It was the second time in a week that a school run by the UN agency for Palestinian refugees had been hit, prompting a blistering attack on Israel by UNRWA Commissioner General Pierre Krahenbuhl.

"I condemn in the strongest possible terms this serious violation of international law by Israeli forces," he said, indicating the school's location in the Jabaliya camp had been communicated to the Israeli army 17 times.

"No words to adequately express my anger and indignation," he wrote on his official Twitter account, describing it as "intolerable."

Israeli tank shelling and air strikes killed 106 Palestinians and wounded hundreds more on Wednesday, medics said, hiking the overall toll to 1,336.

And in Israel, the army said three troops had been killed in Gaza, raising the overall number of soldiers killed to 56 since the operation began on July 8.

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