(AFP) - Israel and Gaza militants traded more heavy fire Thursday, the third day of the worst escalation of violence in months that has killed 25 people in the blockaded Palestinian enclave.

Air strikes by the Israeli army since Tuesday have killed fighters as well as civilians, including several children, said officials in the crowded coastal territory.

Militants in the Gaza Strip have fired more than 500 rockets at Israel, causing no casualties so far, the military said.

Of these, 368 rockets made it over the border and 154 were intercepted by the Iron Dome missile defence system, while 110 fell inside Gaza, it said.

Early Thursday, shops in Gaza were shuttered and the streets were largely abandoned as Israeli military aircraft circled over the territory where several buildings lay in ruins.

The Islamic Jihad militant group told AFP that rockets were fired again at Israel around 9:00 am (0600 GMT).

Islamic Jihad confirmed it has lost four military leaders in strikes in recent days, the most recent being Ali Ghali, commander of a rocket launch unit.

Another militant group, the Popular Front for the Liberation of Palestine, said four of its fighters had been killed.

Israeli Prime Minister Benjamin Netanyahu said in a TV address late Wednesday that "we are still in the midst of the campaign" and "fiercely attacking the Gaza Strip".

"We say to the terrorists and the ones sending them: we see you everywhere, you cannot hide, and we choose the place and the time to hit you."

- 'Wave of escalation' -

In Gaza City's Al-Rimal district, Mamoun Radi, 48, said: "We hope that the wave of escalation will end, but we support revenge for the martyrs.

"Israel assassinated a leader of (Islamic) Jihad at dawn today because it does not want calm."

Across southern Israel, sirens wailed intermittently through the night and Thursday morning.

Miriam Keren, 78, an Ashkelon resident, said a Gaza rocket had destroyed a workshop and damaged her house.

"All the shrapnel is in the room; the house was shaken very powerfully, the glasses fell, the walls were damaged," she told AFP.

"Luckily I have a safe room and I entered it immediately and closed the door.

"This isn't the first time the house was hit but I'm not afraid, neither was I yesterday. You're shocked for a moment but it's not about fear. It's more unpleasant, very unpleasant."

- Ceasefire efforts -

An Islamic Jihad source told AFP that senior member Mohammad al-Hindi, head of the group's political department, would arrive in Cairo on Thursday for talks with Egyptian intelligence officials.

An Israeli official had told AFP on Wednesday that Egypt was "trying to facilitate a ceasefire".

The Arab League has condemned the "barbaric Israeli raids on the Gaza Strip, which targeted civilians, children and women in residential neighbourhoods".

US National Security Advisor Jake Sullivan reaffirmed Washington's "ironclad support for Israel's security".

Both Hamas, which rules Gaza, and Islamic Jihad are considered terrorist groups by Israel and the United States.

This week's Gaza clashes are the worst since a three-day escalation in August killed 49 Palestinians, with no Israeli fatalities.

Violence has also flared in the occupied West Bank, where the Israeli army has staged repeated raids against militants which have often flared into street clashes or gun battles.

On Thursday, a Palestinian died from his wounds after being shot by the Israeli army in a raid the day before in the West Bank city of Qabatiya, the Palestinian health ministry said.

The conflict has escalated since veteran leader Netanyahu returned to power late last year heading a coalition with extreme right and ultra-Orthodox parties.

Israel has also been shaken by its biggest domestic political crisis in decades as mass protests have flared against plans to reform the justice system, spearheaded by Netanyahu who is also battling corruption charges in court.

© Agence France-Presse