Israel rained bombs and leaflets on Gaza, pounding suspected rocket sites and tunnels used by Hamas militants and warning of a wider offensive despite frantic diplomacy to end the bloodshed.

Israeli troops and tanks pulled out of northern Gaza early today after a bloody two-day sweep, killing 29 Palestinians, but Israeli aircraft pounded the area.

ISRAELI air and artillery attacks in the northern Gaza Strip yesterday killed 14 Palestinians, including 12 gunmen and a little girl — the latest violence on the second front of Israel’s fight against Islamic militants.

ISRAELI Prime Minister Ehud Olmert yesterday said freeing Palestinian prisoners in exchange for a captured Israeli soldier would be a “major mistake” and said there can be no negotiations with the “bloody organisation”.

ISRAELI aircraft attacked suspected weapons factories throughout the Gaza Strip yesterday, pressing an offensive against Palestinian militants despite a pledge by a top Hamas leader to halt rocket fire against Israel.