The Tuesday deadline was immediately rejected by Israel, which had sent troops and tanks into northern Gaza after a sixth straight night of air attacks launched in a bid to pressure the Palestinians into giving up the serviceman.
GAZA CITY: Palestinian militants holding an Israeli soldier captive issued an ultimatum on Monday for Israel to free prisoners or face the consequences as the army kept up its military assault on the Gaza Strip.
The Tuesday deadline was immediately rejected by Israel, which had sent troops and tanks into northern Gaza after a sixth straight night of air attacks launched in a bid to pressure the Palestinians into giving up the serviceman.
"Faced with the Zionist enemy's persistence in taking military measures and aggressions, we give it a delay expiring Tuesday, July 4 at 6:00 am (0300 GMT)," warned the three groups that seized the conscript in an attack on an army post eight days ago.
"If the enemy does not meet the demands we laid out in our previous statement... we will consider the matter closed and the enemy will be responsible for all results," said a statement from the Popular Resistance Committees, the armed wing of the ruling Hamas movement and the Army of Islam.
Israel, which has massed a force of 5,000 troops on the Gaza border, swiftly rejected the ultimatum and militant demands for the release of prisoners, amid official warnings the crisis could drag on for months.
"We will not conduct any negotiations on the release of prisoners," Prime Minister Ehud Olmert's office said, holding the Palestinian Authority responsible for the safety of 19-year-old corporal Gilad Shalit.
"Israel will not give in to extortion by the Palestinian Authority and the Hamas government, which are led by murderous terrorist organisations."
On the ground, Israeli troops shot dead a militant from the armed wing of Hamas as forces rolled into the Beit Hanun area of northern Gaza.
The latest salvos in the escalating Middle East crisis followed threats by the armed wing of Hamas -- boycotted as a terrorist group by Israel and the West -- that it would strike civilians in Israel if the Gaza offensive is not halted.
Israel has launched its biggest military operation in response to the abduction of Shalit in a raid on June 25, warning it would use all its military might to secure his release.
The international community has issued urgent appeals for restraint to stop the conflict spreading. Russian Foreign Minister Sergei Lavrov, whose country is a member of a Middle East diplomat quartet and recently hosted a visit by Hamas leaders, said Moscow was "using all channels available to us" to try to free the soldier.
Egyptian President Hosni Mubarak, who has been involved in mediation efforts, also flew to Saudi Arabia to discuss the crisis with King Abdullah. Pan-Arab newspaper Al-Hayat said an Egyptian delegation mediating in the crisis had met Shalit in Gaza but gave neither a date nor location.
Israel has used its firepower against militant and civilian targets across Gaza with wave after wave of night-time air strikes, and in a dramatic warning to Hamas Sunday hit the office of prime minister Ismail Haniya. For the first time since Israel launched its Gaza assault early Wednesday, the military sent its armour into the north of the territory, although it has yet to launch a major threatened ground offensive in the area.
Speaking after talks in Moscow with Lavrov, visiting Israeli Foreign Minister Tzipi Livni said her government had run out of patience.
"We cannot allow terror to become an instrument for reaching a goal in the Middle East and we would like to send this message to the Palestinians, to their leadership," she said.
Less than 10 months after Israel left Gaza following a 38-year occupation, anxious Palestinian residents watched dozens of tanks and bulldozers returning to their farmland, while local medics braced for an influx of casualties.
"We are already packed with people suffering from mental disorders, who have not been able to get any sleep for days because of the shelling, air raids and sonic booms," said Mohammed Yagi, head doctor of a clinic in Beit Lahiya.
A military source said a limited number of troops had entered northern Gaza early Thursday searching for explosive devices and tunnels dug by militants into Israel. The raid followed a series of air strikes on weapons depots, a Hamas office and buildings run by the Al-Aqsa Martyrs Brigades, a militant group loosely affiliated to Palestinian president Mahmud Abbas's Fatah party.
Haniya had appealed Sunday for international intervention against Israel's "insane policy" after a helicopter gunship struck at the heart of the Palestinian government, setting his Gaza office ablaze in a missile strike. The armed wing of Hamas threatened to retaliate by resuming attacks inside Israel, threatening a "sea of blood" if the offensive continued. Olmert's government has rejected outright the demands of the three militant groups which have called for the release of 1,000 Palestinians held in Israeli jails as well as women and children prisoners. It has also threatened to strike at Hamas leaders, including those based in Damascus, raising fears of a regional escalation of the worst crisis in the Middle East since Hamas came to power and Olmert took the helm in Israel.
Israel last week hit the Hamas-run interior ministry in Gaza, detained scores of Hamas members in the occupied West Bank, including a third of the cabinet, and revoked the Jerusalem residency of four others. Threatened with a fullscale ground offensive, impoverished residents of Gaza, one of the most densely populated areas on the planet with a population of 1.4 million, are grappling with food, fuel and electricity cuts.
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