Israeli Prime Minister Benjamin Netanyahu on Sunday offered to let Hamas leaders leave Gaza but demanded the group abandon its arms, as his country kept up its bombardment of the Palestinian territory.

Gaza's civil defence agency said an Israeli air strike on a house and tent sheltering displaced Palestinians killed at least eight people, including five children.

The strike hit Khan Yunis on the first day of Eid al-Fitr, the festival marking the end of the Muslim fasting month of Ramadan.

Samah Dahliz, 38, whose young relative was among the dead, said: "What kind of Eid is this that we are going through?"

"He's a child, his parents had bought him new clothes for Eid to make him happy," she told AFP.

"They bombed them in their tent while they were sleeping."

Israel resumed intense bombing of Gaza on March 18 and then launched a new ground offensive, ending a nearly two-month ceasefire in the war with Hamas.

Rejecting domestic criticism that the government was not engaging in diplomacy to release hostages, Netanyahu argued the renewed military pressure was proving effective.

"We are negotiating under........

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