GAZA CITY: Artillery fire pounded southern Gaza early on Wednesday as Israel said it had begun `flooding Hamas tunnels` and mediators sought a halt to the nearly fourmonth hostilities.

The focus of the fighting in recent weeks has been Khan Yunis, the southern Gaza Strip`s main city, where a constant barrage of air strikes and shelling rent the air all night.

The health ministry recorded 125 deaths across southern Gaza in the latest Israeli strikes.

United Nations agencies` chiefs said a bitter row over the main aid organisation for Palestinians could `have catastrophic consequences for the people of Gaza`.

Major donors, including the United States and Germany, have suspended funding to the UN agency for Palestinian refugees, UNRWA, over accusations that several staff members were involved in the Oct 7 raids in Israel.

Withholding the funds was `perilous and would result in the collapse of the humanitarian system in Gaza`, the heads of the UN agencies said in a joint statement.

Meanwhile, mediation efforts gathered pace following a Sunday meeting of top US, Israeli, Egyptian and Qatari officials that produced a proposed framework for a new truce and prisonerrelease.

`Constant fear` The Israeli army said on Wednesday its troops had killed 15 `terrorists` in northern Gaza, and captured 10 `militants` during an attack on a school where they were allegedly hiding.

In Khan Yunis, where the Hamas media office said there were `dozens of air raids` overnight, vast areas have been reduced to a muddy wasteland of bombed-out buildings.

According to witnesses, artillery shells hit the area of Nasser Hospital, the city`s largest, where the UN humanitarian agency OCHA has said thousands of displaced Palestinians are sheltering.

Eyewitnesses reported people fleeing Khan Yunis on Tuesday as explosions sounded nearby. `We left Nasser Hospital...

under tank fire and air strikes. We didn`t know where to go,` said one woman.

`We`re out in the cold, left to fend for ourselves.The Palestinian Red Crescent said on social media platform X that `Israeli shelling and gunfire continue` around another hospital in Khan Yunis.

Staff and patients at the Red Crescent`s Al Amal Hospital `and thousands of displaced people, primarily children and women, live in constant fear and anxiety`, it said.

Israel accuses Hamas of operating from tunnels under hospitals in Gaza and of using medical facilities as command centres, a charge deniedbythe Palestiniangroup.

The Israeli military said it had begun `flooding the tunnels` with water in a bid to `neutralise the threat of Hamas`s subterranean network`.

Negotiations Qatar, which helped broker a previous truce and prisoner release in November, voiced hope an initial deal now being negotiated might lead to a `permanent ceasefire`.

A Hamas official said the group is `open to discussing all issues, including prisoner exchange and reconstruction of the Gaza Strip`.

The official reiterated Hamas`s demand for a comprehensive and complete cessation of Israel`s aggression and the withdrawal of its troops from Gaza.

Israeli Prime Minister Benjamin Netanyahu, whose office earlier called the negotiations `constructive`, ruled out releasing `thousands` of Palestinian prisoners as part of any deal.

`I would like to make it clear... We will not withdraw the army from the Gaza Strip and we will not release thousands of terrorists. None of this will happen,` he said on Tuesday.

A pro-Iran group in Iraq, Kataeb Hezbollah, said it would halt attacks on US `occupation forces, in order to prevent embarrassment to the Iraqi government`.

The United States and Britain have also launched a campaign of air strikes against Yemen`s Houthis, who have carried out repeated attacks on shipping in the Red Sea in solidarity with Palestinians in Gaza.

The Houthis said on Wednesday they had fired `several` missiles at a US warship, hours after the US military said it had shot down another anti-ship missile over the vital trade route.-AFP