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(AFP) - Israel imposed a total siege on the Gaza Strip Monday and cut off the water supply as it kept bombing targets in the crowded Palestinian enclave in response to the Hamas surprise assault it has likened to the 9/11 attacks.

Reeling from the Islamist group's unprecedented ground, air and sea attacks, Israel has counted over 700 dead and launched a withering barrage of strikes on Gaza that have killed 560 people there.

The skies over Gaza were blackened by plumes of smoke from deafening explosions as Hamas kept launching rockets as far as Tel Aviv and Jerusalem, where missile defence systems fired and air raid sirens blared.

Hamas -- whose militants surged into Israeli towns on Saturday, spraying gunfire at civilians and dragging off about 100 hostages -- claimed on Monday that Israeli air strikes had killed four of the captives.

Israel said it had called up 300,000 army reservists for its "Swords of Iron" campaign, and truck convoys were moving tanks to the south, where its forces had dislodged the last holdout Hamas fighters from embattled towns.

"We are in control of the communities," said military spokesman Daniel Hagari, cautioning that some "terrorists" may remain after about 1,000 militants had swarmed into the region on the Jewish Sabbath.

Defence Minister Yoav Gallant said Israel would impose a "complete siege" on the long blockaded enclave and stressed what this meant for its 2.3 million people: "No electricity, no food, no water, no gas -- it's all closed."

Palestinians in the impoverished coastal territory braced for what many feared will be a massive Israeli ground attack aiming to defeat Hamas and liberate the hostages.

Israel Prime Minister Benjamin Netanyahu has warned Gaza civilians to get away from all Hamas sites, which he vowed to turn "to rubble".

- Lebanon border clash -

Middle East tensions have spiked as Israel's arch enemy Iran and their Lebanese ally Hezbollah have praised the Hamas attack, although Tehran rejected any role in the military operation.

Hamas has called on "resistance fighters" in the occupied West Bank and in Arab and Islamic nations to join its "Operation Al-Aqsa Flood", launched half a century after the 1973 Arab-Israel war.

"The military operation is still continuing," Hossam Badran, a Hamas official, told AFP from Doha, adding that "there is currently no chance for negotiation on the issue of prisoners or anything else".

The United States has pledged "rock solid" support for Israel and said it would send munitions and military hardware to its key ally and divert an aircraft carrier group to the eastern Mediterranean.

Israel, which has long prided itself on a high-tech military and intelligence edge in its many conflicts, has been shaken to the core by Hamas's unprecedented attack.

It now faces the threat of a multi-front war after Hezbollah launched guided missiles and artillery shells from the north on Sunday "in solidarity" with Hamas, in what some observers considered a warning shot.

On Monday, the Israeli army said its soldiers had "killed a number of armed suspects" who had crossed the border from Lebanon and that Israeli helicopters were striking targets in the area.

A local Lebanese official told AFP Israel was shelling the southern border area while Hezbollah denied involvement in clashes or "any infiltration attempt" into Israel.

- 'They butchered people' -

Israel has expressed alarm and revulsion at the Hamas attack across the Gaza border fence -- long deemed impregnable and guarded by surveillance cameras, drones, patrols and watchtowers -- and the bloody violence they unleashed.

Among the hostages they took back into Gaza were children and a Holocaust survivor in a wheelchair, Israeli officials have said.

Up to 250 bodies were strewn across the site of a music festival in a Negev desert kibbutz, mostly young people, and charred car wrecks were piled up in a sign of the panicked rush to escape, while other revellers were feared to be among the hostages.

"They butchered people in cold blood in an inconceivable way," said Moti Bukjin of the Zaka religious volunteer group which helped collect the human remains.

Israelis have voiced anger at the intelligence failure that blindsided the nation on a Jewish holiday.

But for now its people appeared to have put aside deep political divisions that have long roiled the country and braced for what the right-wing veteran premier Netanyahu has warned will be a "long and difficult war".

- 'In constant fear' -

Never before have so many Israelis been killed by one single thing, let alone enemy activity in one day," said army spokesman Lieutenant Colonel Jonathan Conricus.

The multi-pronged attack had brought "by far the worst day in Israeli history", he said, likening it to a combination of the "9/11 and Pearl Harbour" attacks.

The situation was also dire inside Gaza, which has been blockaded by Israel since Hamas assumed control there 15 years ago, a period that has seen multiple wars with Israel.

Air strikes have levelled residential tower blocks, mosques and the central bank. More than 120,000 people in Gaza have been displaced, said the United Nations.

"The situation is unbearable," said Amal al-Sarsawi, 37, as she took shelter in a school classroom with her terrified children.

The sense of safety of children in the war zone has been "ripped away" said Jason Lee of charity group Save the Children.

"Our teams and their families are terrified, they feel like sitting targets. Children across the region are in constant fear."

- Global shock waves -

Palestinians in the occupied West Bank have rallied in support and clashed with Israeli security forces, leaving 15 Palestinians dead since Saturday.

Anti-Israel activists have demonstrated in Lebanon, Iraq, Pakistan and elsewhere while security was stepped up around Jewish temples and school worldwide.

The spiralling conflict has sent shock waves around the world amid fears of a wider escalation, sparking a surge in oil prices on fears of tightening supplies.

Western capitals have condemned the attack by Hamas, which the United States and European Union consider a terrorist group.

The EU has halted development aid payments to the Palestinians and said it was placing 691 million euros ($728 million) of support "under review".

Foreign or dual nationals have been reported killed, abducted or missing by countries including Brazil, Britain, Cambodia, Canada, France, Germany, Ireland, Mexico, Nepal, Panama, Paraguay, Thailand, Ukraine and the United States.

In the Egyptian city of Alexandria a police officer opened fire "at random" on Israeli tourists Sunday, killing two of them and their Egyptian guide before he was arrested.

Israel, which has struck US-brokered normalisation deals with several Arab nations in recent years, has issued a travel warning for its citizens, especially in the Middle East.

The Arab League said its foreign ministers will hold an "extraordinary meeting" on Wednesday to discuss "Israeli aggression on the Gaza Strip".

© Agence France-Presse