Cross-border fighting between Israel and Hamas abated after a day of Palestinian rocket attacks and Israeli air strikes, but tensions remained high with Israeli forces massed along the Gaza frontier.
Rocket warning sirens continued to sound in Israeli towns near the border late on Monday after Palestinian officials said Egypt had mediated a truce. But by Tuesday morning, the border area had fallen quiet.
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The latest round of violence began early Monday when seven Israelis were wounded near Tel Aviv when a house was destroyed by a rocket attack.
Hours later Israel carried out a wave of retaliatory strikes, wounding five Palestinians.
Hamas, the Islamist militant group that rules Gaza, and smaller Palestinian factions issued a late-night statement that Egypt had mediated a ceasefire.
Israeli officials did not comment on whether a truce had been reached.
Israel remained on high alert, with schools near the border kept closed and residents instructed to stay near bomb shelters.
The military said in a statement it remained "prepared for various scenarios".
The escalation came just two weeks before an election in which Prime Minister Benjamin Netanyahu is fighting for his political life after a decade in power, campaigning on a tough line against Palestinian militants.
Beset by corruption scandals, he faces a strong challenge from a centrist coalition led by a top general.
Netanyahu cut short a visit to the United States, saying he would fly home right after meeting President Donald Trump.
"Israel will not tolerate this. I will not tolerate this," Netanyahu said. "And as we speak... Israel is responding forcefully to this wanton aggression."
Trump told reporters with Netanyahu at his side that Israel has the "absolute right" to defend itself.