The troops were positioned on the sites of two former Jewish settlements that were dismantled in 2005. Military planning
Jacky Rowland, Al Jazeera's correspondent in Jerusalem, said: "We understand that the government has asked the Israeli army to do some scenario planning ... for if Israel were to deem it was in its interests to go into Gaza and attempt to take out Hamas."
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"Apparently they are looking at scenarios that would deploy maybe 20,000 Israeli troops. But this is very much a contigency plan being worked out on the assumption that rocket attacks and weapons smuggling will continue."
Earlier, Binyamin Ben-Eliezer, Israel's infrastructure minister whose office controls fuel supplies, called for a complete separation between the Gaza Strip and the West Bank.
"We should simply increase the isolation of Gaza," Ben-Eliezer told Israel's army radio. "I want to stop everything until we understand what is going on there."
Israeli media said that the cutting off of Dor Alon's supplies would mean that most vehicles in Gaza could grind to a halt within two weeks.
"For the moment we have fuel, but we don't know if this fuel will last for several days," Mahmud, who works at a petrol station in Gaza City, said. "The people are afraid that with an extended Israeli closure, it will run out."
Israel insisted that the company had cut off supplies to Gaza at the request of Mahmoud Abbas's government, but the Palestinian president's aides vigorously denied the charge.
Saeb Erekat, a senior aide to Abbas, said he had asked Israel to allow fuel and raw materials to continue reaching the 1.5 million Palestinians living in Gaza.
"I have spoken to the Israelis about President Abbas's request to maintain the flow of food, medical supplies, fuel, electricity and water to Gaza," he said.
Nour Odeh, Al Jazeera's correspondent in the Gaza Strip, said there was a panic situation in the territory because of reports that Israel would stop food supplies.
"Throughout the past two days we have seen people spend all that they have, all that they can spare ... to stock up on food supplies, extra water and fuel for the cars, and medicine they know or think they may need," she said.
"[Israel] won't be able to starve the Gaza Strip but things will become difficult. Already we have seen prices rising because of this fear and the depletion of resources."
Queues were reported outside bakeries and supermarkets across the territory.
"More and more people are coming, buying everything to store in their house," Samir Nasser, the owner of a small supermarket in western Gaza City, said. "They are afraid of a prolonged Israeli closure."
A senior official travelling with Ehud Olmert, the Israeli prime minister, on a visit to the US insisted that Israel would ensure the delivery of essential supplies.
"There will not be a humanitarian crisis in Gaza," the official said.
Other Gazans are attempting to leave the impoverished territory where 80 per cent of the population depends on aid of some sort.
|Hundreds of Palestinians have headed for |
the Erez crossing into Israel [Reuters]
About 500 Palestinians, mostly women, children and the elderly, had gathered at the Erez crossing with Israel on Sunday, sitting on suitcases in the baking sun without food or water, witnesses said.
An Israeli army spokesman said hundreds of Palestinians had approached the fence.
"They were pushed back by soldiers firing in the air. Israel has no intention of allowing Palestinians to pass through. Only those who have special status can cross," he said.
Fighters from Hamas's armed wing have set up a checkpoint about 700 metres away to prevent any more people reaching the crossing.
International relief agencies urged Israel to reopen the crossings into Gaza crossing to avoid a humanitarian crisis.
"The crossings remaining closed is not an option. The Gaza Strip is entirely dependent of the importation of not just aid, but also commercial trade," John Ging, the head of the Palestinian refugee agency in Gaza (UNRWA), told the AFP news agency.