Israeli Prime Minister Binyamin Netanyahu has said that his country is ready to "significantly expand" its operation against fighters in the Hamas-ruled Gaza Strip.
"The operation in the Gaza Strip is continuing, and we are preparing to expand it," Netanyahu said at the weekly cabinet meeting on Sunday.
His announcement came as at least five people in the Palestinian enclave were killed in bombardment from air and sea on Sunday.
"We are extracting a heavy price from Hamas and the terror organisations," he said.
His remarks came as thousands of Israeli troops backed by armour massed along the border, fuelling fears that Israel is poised to expand its relentless aerial bombing campaign into a ground operation.
Netanyahu said he was holding ongoing talks with world leaders, "and we appreciate their understanding of Israel's right to self defence."
Al Jazeera's Hoda Abdel-Hamid, reporting from Sderot in southern Israel, said Netanyahu has a lot of support for a ground operation, especially in the southern parts of the country.
But a ground invasion of the Gaza Strip would lose Israel much international sympathy and support, British Foreign Secretary William Hague warned on Sunday.
Hague told Sky News television it was much more difficult to limit civilian casualties in a ground assault and it would threaten to prolong the conflict.
"A ground invasion of Gaza would lose Israel a lot of the international support and sympathy that they have in this situation," Hague said.
"A ground invasion is much more difficult for the international community to sympathise with or support - including the United Kingdom."
He said Britain would like to see an agreed ceasefire, with an end to the rocket attacks being an essential component of any peace deal.
Egyptian President Mohamed Morsi said there were "some indications" a ceasefire could be reached soon, but he had no firm guarantees.
Morsi told reporters in Cairo his government was in "vigorous" communication with both Israel and the Palestinians.
Egypt, which brokered an informal truce in October that had since collapsed, has said it is working for a new deal after its Prime Minister Hesham Qandil visited Gaza on Friday.
Israeli President Shimon Peres said in an interview on Sunday he welcomed efforts by Morsi to secure a
Asked by Britain's Sky News television if he saw any possibility of a de-escalation of the conflict, he replied from Jerusalem: "As far as we are concerned, the answer is yes.
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But he also accused Hamas of rejecting the ceasefire proposals.
Hamas "don't even listen to their Arab brothers," he said.
"We don't escalate at all. What Israel is doing is self defence ... We don't have any purpose to conquer Gaza."
Hamas chief Khaled Meshaal was in Cairo for talks and was due to meet Morsi.
A Palestinian official told Reuters the truce discussions would continue in Cairo on Sunday, saying "there is hope", but that it was too early to say whether the efforts would succeed.
The Arab League said a delegation headed by the bloc's chief Nabil el-Araby will visit the Gaza Strip on Tuesday in a show of support, a league official said on Sunday.
French Foreign Minister Laurent Fabius left Paris on Sunday for Israel "to call on all the parties to stop the escalation and offer France's help to reach an immediate ceasefire," his ministry said.
During his one-day trip, the minister will meet the Israeli authorities and Palestinian Authority President Mahmoud Abbas, his ministry said in a statement.
US President Barack Obama said it was "preferable" for the Gaza crisis to be ended without a "ramping up" of Israeli
military activity, but squarely blamed Palestinian fighters for causing the showdown.
"Israel has every right to expect that it does not have missiles fired into its territory," Obama said, adding, "if that can be accomplished without a ramping up of military activity in Gaza, that is preferable".