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AFP
A Palestinian man pushes his bicycle amidst debris following an Israeli military strike in Gaza city, on July 23, 2014. Photo by AFP

GAZA CITY, Gaza Strip AP - Israeli troops battled Hamas militants on Wednesday near a southern Gaza Strip town as the U.S. secretary of state flew into Israel to press top-gear efforts for a truce in the conflict that has so far killed at least 657 Palestinians and 31 Israelis.

Trapped by the fighting in Khan Younis, a town on the southern edge of the Gaza Strip, dozens of Palestinian families scrambled to flee the area.

John Kerry landed in Tel Aviv despite a Federal Aviation Administration ban following a Hamas rocket near the airport the day before, reflecting his determination to achieve a cease-fire agreement between the warring sides.

Kerry was to meet with Israeli Prime Minister Benjamin Netanyahu, Palestinian President Mahmoud Abbas and United Nations Secretary-General Ban Ki-moon in Jerusalem and Ramallah in what appeared to be a crucial day in the flailing talks. U.S. officials have downplayed expectations for an immediate, lasting truce between Israel and the Hamas militant group that controls Gaza.

In Jerusalem, Kerry said negotiations toward a Gaza cease-fire agreement were making some progress after days of a deadly impasse between Israel and Hamas militants. He was not specific in describing what he called steps forward in the negotiations as he met for a second time this week with United Nations chief Ban Ki-moon.

Meanwhile, a foreign worker in Israel was killed when a rocket fired from the Gaza Strip landed in southern Israel on Wednesday, police spokeswoman Luba Samri said. She did not immediately know the worker's nationality.

Israel also reported that two more of its soldiers have died in the conflict, bringing the military's death toll to 29, but did not elaborate on the circumstances of the latest casualties. Two Israeli civilians have also died in the 15-day fighting

A Palestinian health official said eight Hamas fighters died in the ferocious battle near Khan Younis, from where the Palestinian Red Crescent was trying to evacuate about 250. Khan Younis has been under Israeli tank shelling and drone strikes since early Wednesday.

The Red Crescent said Hamas fighters in the area were deploying rocket propelled grenades and light weapons, including machine guns, against the Israelis.

Hundreds of residents of eastern Khan Younis were seen fleeing their homes as the battle unfolded, flooding into the streets with what few belongings they could carry, many with children in tow. They said they were seeking shelter in nearby UN schools.

"The airplanes and airstrikes are all around us," said Aziza Msabah, a resident of Khan Younis. "They are hitting the houses, which are collapsing upon us."

The Israeli military did not respond to Associated Press inquiries as to why such heavy fighting was concentrated in Khan Younis, saying only it was conducting operations throughout the Gaza Strip. The fighting was centered on an agricultural area, which Israel has claimed is a site for Hamas tunnels going under the border into Israel.

The Palestinians say Israel is randomly deploying a wide array of modern weaponry against Gaza's 1.7 million people, inflicting a heavy civilian death toll and destroying large amounts of property there. By mid-day Wednesday, the Palestinian death toll stood at 657, according to Gaza health official Ashraf al-Kidra, most of them civilians.

Israel says it began the Gaza operation to halt Hamas rocket fire into Israel - more than 2,100 have been fired since the conflict erupted - and to destroy a network of tunnels leading from Gaza to Israel that are intended to allow Hamas militants to carry out attacks against Israelis.

As the Gaza death toll mounted, a 34-year-old Palestinian man was killed in clashes with Israeli soldiers near the West Bank City of Bethlehem, a potentially ominous development in an area that has so far been relatively free of violence, despite the Gaza fighting.

Mahmoud Hamamreh was killed in stone throwing clashes in the village of Husan early Wednesday, doctors said.

On Tuesday, U.S. and European airlines quickly canceled flights to Israel after a Hamas rocket hit near the Ben Gurion International Airport in Tel Aviv, dealing a blow to Israel's lucrative tourist industry.

The conflict is also starting to strain the Israeli economy. Military and finance ministry officials have said that the first 10 days of the operation had direct costs of about 2 billion shekels - about $585 million.