Power outages have become commonplace in the Gaza Strip in recent months after Israel declared the area a "hostile entity" and began restricting fuel supplies.
However, Arye Mekel, the Israeli foreign ministry spokesman, said that supplies of petrol used in cars, as well as diesel, had been halted but not fuel oil and cooking gas.
"The ball is in their court," Mekel said. "If they stop the rockets today, everything would go back to normal."
He suggested the power plant's shutdown was unnecessary saying: "They have an interest in exaggerating".
Al Jazeera's Jacky Rowland, reporting from Gaza, said that electricity was running out fast.
"The only power station in Gaza has already closed down half its power generating capacity. The final generating unit is set to close in a matter of hours," she said.
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"No fuel coming in means no power generation, it also means no fuel for the generators that fuel the water pumps - a lot of the water in Gaza is deep beneath the surface, and it has to be pumped to the surface - so no fuel can also mean no water."
As fuel runs out, residents are scrambling for basic necessities.
People are stocking up on fuel and food before prices spike and supplies run dry.
"People are shopping feverishly, fearing products will vanish from the shelves soon," Jihad Abu Anwar, a grocery store owner, told the Reuters news agency.
Basim Naeem, the Hamas-appointed health minister, said that the already crumbling health system was in danger of collapsing and patients' lives were increasingly at risk due to the fuel cuts.'Humanitarian standards'
UNRWA, the UN organisation supporting Palestinian refugees, warned that the shortages would drastically affect hospitals, sewage treatment plants and water facilities.
"The logic of this defies basic humanitarian standards," Christopher Gunness, UNRWA spokesman, said.
Hospitals are able to opearte using generators when the power goes out, but they will have to cut back on activities like laundry, waste incineration and sterilisation, hospital officials said.The UN has said Israel should not collectively punish Gaza's population while responding to security threats.