• At least 200 Israelis killed and 1,100 wounded; more than 230 killed in Gaza
  • Fighting ongoing at 22 locations inside Israel
Gunmen from the Palestinian group Hamas rampaged through Israeli towns Saturday killing and capturing scores of civilians and soldiers in a surprise assault, met by Israel with massive retaliatory air strikes that killed scores in the Gaza Strip.
The worst attack on Israel for decades unleashed a war that both sides vowed to escalate. At least 200 Israelis were reported killed and 1,100 wounded by gun battles raging in more than 20 locations inside Israel.
In Gaza, health officials reported more than 230 people killed and 1,600 wounded.
"Our enemy will pay a price the type of which it has never known," Prime Minister Benjamin Netanyahu said. "We are in a war and we will win it".
Hamas leader Ismail Haniyeh said the assault that had begun in Gaza would spread to the West Bank and Jerusalem.
"This was the morning of defeat and humiliation upon our enemy, its soldiers and its settlers," he said in a speech.
In Sderot, in southern Israel near Gaza, bodies of Israeli civilians lay strewn across a highway, surrounded by broken glass.
Fighting between Israeli troops and hundreds of Palestinian militants was ongoing at "22 locations' inside Israel, an army spokesman said.
He said there was a "severe hostage situation in Beeri and also in Ofakim", two Israeli communities near the Gaza border.
In Gaza, black smoke and orange flames billowed into the evening sky from a high rise tower hit by an Israeli retaliatory strike. Crowds of mourners carried the bodies of freshly killed militants through the streets, wrapped in green Hamas flags.
Gaza's dead and wounded were carried into crumbling and overcrowded hospitals with severe shortages of medical supplies and equipment. The health ministry said 232 people had been killed.
By nightfall in southern Israel, residents had yet to be given the all-clear to leave the shelters where they had hidden from the gunmen since the early hours.
Hamas said it fired a volley of 150 rockets towards Tel Aviv Saturday evening.
Hamas deputy chief Saleh al-Arouri told Al Jazeera that the group was holding a big number of Israeli captives, including senior officials. He said Hamas had enough captives to make Israel free all Palestinians in its jails.
The Israeli military confirmed Israelis were being held in Gaza. A military spokesman said Israel could mobilise up to hundreds of thousands of reservists and was also prepared for war on its northern front against Lebanon's Hezbollah group.