Israel welcomes Egyptian-proposed Gaza truce, Hamas says they were not consulted

* Cairo seeks Arab League backing for ceasefire proposal

* Netanyahu convenes ministers, Hamas threatens escalation

* Gaza-Israel violence wanes but rockets fired at Eilat

* Obama says encouraged by prospects for restoring calm

 An Egyptian-proposed deal that would halt the week-old Gaza shelling war was welcomed by Israel on Tuesday but regarded suspiciously by the Palestinian territory's dominant Hamas Islamists, who said they had not been consulted by Cairo.

Hamas's armed wing vowed its rocket attacks on the Jewish state would "increase in ferocity and intensity" but cross-border violence waned ahead of the mooted 0600 GMT truce. Israeli Prime Minister Benjamin Netanyahu convened his security cabinet at Tel Aviv military headquarters for a possible vote approving the ceasefire. Amos Gilad, a senior Israeli defence official and envoy to Cairo, cast the deal positively, saying Hamas had been weakened militarily by the air and sea bombardment of impoverished Gaza. 

"Look at the balance, and you see that Hamas tried every possible means of striking at Israel while bringing great and terrible damage on its people, from their perspective," Gilad told Israel's Army Radio. "The Egyptian proposal includes a halt to all kind of (military) activity," he said. "What this proposal, if it is accepted, means is that, willy-nilly, Hamas did not manage to make good on its intentions."

Sami Abu Zuhri, a Hamas spokesman in Gaza, said the Islamist group had not received an official ceasefire proposal, and he repeated its position that demands it has made must be met before it lays down its weapons. Hamas's armed wing, the al-Qassam Brigades, rejected the reported text of the truce deal, saying: "Our battle with the enemy continues and will increase in ferocity and intensity."

An Israeli military spokesman said two rockets had been fired from Gaza overnight, causing no damage. He said Israel bombed 25 sites in Gaza, where there was no immediate words of casualties.

ROCKETS IN EILAT

Gaza health officials earlier said at least 180 Palestinians, many of them civilians, had been killed in the worst flare-up of Israeli-Palestinian violence in two years. There have been no fatalities in Israel, largely due to its Iron Dome anti-missile system, but the frequent rocket salvoes have disrupted life as sirens sent people racing to shelters.

In what may have been an effort to upstage Cairo's mediation, three rockets were launched from the Egyptian Sinai at the southern Israeli resort of Eilat, wounding four people, Israeli officials said. They said the salvo was likely fired by Islamist fighters hostile to Israel and the Egyptian government. Under the proposal announced by Egypt's Foreign Ministry "de-escalation arrangements" would take effect at 0600 GMT, pending implementation of a full truce within 12 hours after. High-level delegations from Israel and the Palestinian factions would hold separate talks in Cairo within 48 hours to consolidate the ceasefire with "confidence-building measures". The Arab League said in a statement it welcomed the Egyptian initiative "to protect the lives of the innocent."

Palestinian President Mahmoud Abbas, who reached an agreement with Hamas in April that led to the formation of a unity government last month, welcomed the proposal and urged its acceptance, official Palestinian news agency WAFA said. U.S. Secretary of State John Kerry will hold talk with Egyptian officials in Cairo on situation on Tuesday, Egypt's state news agency said. In Washington, U.S. President Barack Obama on Monday spoke positively of the emerging ceasefire.

Reiterating U.S. support for Israel in the face of Hamas's "inexcusable" attacks and concern for Palestinian civilian casualties, Obama said in a speech: "We are encouraged that Egypt has made a proposal to accomplish this (truce) goal which we hope can restore a calm that we've been seeking."

Hours before the proposal was announced, Gaza militants resumed rocket attacks on Tel Aviv after a 24-hour lull, while Israel kept up its strikes in the Gaza Strip and deployed infantry and armour along the frontier. Israel had mobilised tens of thousands of troops for a threatened Gaza invasion if the rocket salvoes persisted. Late on Monday, Israel bombed the house of Marwan Issa, a top commander of Hamas' armed wing, in Bureij refugee camp.

HAMAS DEMANDS

The surge in hostilities over the past week was prompted by the murder last month of three Jewish seminary students in the occupied West Bank and the revenge killing on July 2 of a Palestinian youth in Jerusalem. Israel said on Monday three Jews in police custody had confessed to killing the Palestinian.

Hamas leaders have said a ceasefire must include an end to Israel's blockade of Gaza and a recommitment to a truce reached in an eight-day war there in 2012. Hamas also wants Egypt to ease restrictions at its Rafah crossing with Gaza imposed after the military toppled Islamist president Mohamed Mursi last July.

But the Egyptian proposal made no mention of Rafah or when restrictions might be eased. It said only that "crossings shall be opened and the movement of persons and goods through (them) shall be facilitated once the security situation becomes stable on the ground".

Hamas has faced a cash crisis and Gaza's economic hardship has deepened as a result of Egypt's destruction of cross-border smuggling tunnels. Cairo accuses Hamas of aiding anti-government Islamist militants in Egypt's Sinai peninsula, an allegation the Palestinian group denies.

Hamas has said it wants the release of hundreds of its activists arrested in the West Bank while Israel searched for the three missing teens. The detainees include more than 50 Hamas men freed from Israeli jails in a 2011 prisoner exchange.

The proposed truce made no mention of the detainees in stipulating that "other issues, including security issues, shall be discussed with the sides."