"This is going to burn down the entire warehouse ... thousands and thousands of tonnes of food, medical supplies and other emergency assistance are there."
Ban Ki-moon, the UN secretary-general, said he was "outraged" by the attack on the UN compound and demanded an explanation as he met Israeli officials in Tel Aviv.
About 500 people were inside the hospital in Tal al-Hawa when it came under attack. Many had taken shelter in the hope of escaping the onslaught.
"The last hit was on the Red Crescent's operations building and destroyed the pharmacy. There's a hole in the roof and a fire is still burning," Sharon Locke, a hospital volunteer, told Al Jazeera.
A building housing a number of international media organisations and several housing blocks were also reportedly hit on Thursday.
Al Jazeera's Ayman Mohyeldin, reporting from Gaza City, said that the Israeli shelling was the closest to the centre of the city that it had been during the Israeli offensive.
"There have, no doubt, been a series of air strikes that have destroyed so many of the buildings here in the heart of Gaza City, but this is the first time we have seen this kind of shelling," he said.
"We are getting some very horrific accounts from people trapped in buildings unable to leave."
Mays al-Khatib, a Gaza resident, was speaking to Al Jazeera on the telephone when her building came under attack.
"The shelling is continuous since last night, we are here in this place, we are around 500 families here under bombardment," she was narrating, when the telephone went dead.
Al Jazeera sources said she survived, though her building collapsed.
Israel also hit smuggling tunnels from Egypt into the southern Rafah area of Gaza.
"They used bombs that went deep into the tunnels and shook the whole Rafah refugee camp. The land trembled beneath our feet," Bassam Abdallah, a local Palestinian cameraman, said.
One of Israel's stated objectives is to stop the smuggling of weapons across the border to Palestinian fighters.
The tunnels are also used to bring in basic supplies for the territory which has been suffering under an Israeli blockade.
At least 1,054 Palestinians have been killed since Israel began its assault on the Gaza Strip on December 27, medics said.
More than 4,800 people have been injured in the violence.
Ban told a news conference in Tel Aviv that the death toll was "unbearable".
"The time has come for the violence to stop and for us to change fundamentally the dynamics in Gaza"
"The time has come for the violence to stop and for us to change fundamentally the dynamics in Gaza and to pursue again the peace talks for a two-state solution which is the only road for lasting security for Israel," he said.
Thirteen Israelis have been killed in the conflict, including three civilians.
However, the two sides appeared to be inching closer towards a ceasefire deal on Thursday.
Amos Gilad, a senior Israeli envoy, was expected to meet Egyptian mediators in Cairo after a Hamas delegation gave its view on the proposed agreement.
Meanwhile, a Greek-flagged vessel trying to break the blockade of the Gaza Strip with medical aid for the Palestinians was turned back to Cyprus by an Israeli naval vessel.
Huwaida Arraf, an organiser with the US-based Free Gaza Movement, said that the boat was intercepted about 100 miles northeast of Gaza.
"They got very close and they threatened that if we continued they would open fire on us," she told the Reuters news agency.
"They surrounded us with about four warships making it very difficult to navigate. They said they would use all means to keep us out of Gaza."