Talks to end a month-long war between Israel and Gaza militants are "difficult", Palestinian delegates said on Tuesday, while Israeli officials said no progress had been made so far and fighting could soon resume.

As a 72-hour ceasefire held for a second day, Palestinian negotiators held fresh talks with Egyptian intelligence following a meeting on Monday that lasted nine hours.

Hamas, the Islamist group that dominates the Gaza Strip, and its allies are seeking an end to an Israeli and Egyptian blockade of the coastal Palestinian enclave.

"We are facing difficult negotiations," Hamas' leader in Cairo, Moussa Abu Marzouk, said on Twitter.

An Israeli official, who declined to be named, said the gaps between the sides were big. "There is no progress in the negotiations," the official said.

Defence Minister Moshe Yaalon told Israel's armed forces to prepare for a possible resumption of hostilities.

"I don't know if, by midnight on Wednesday, we will reach an accommodation. I don't know if we will need to extend negotiations. It could be that shooting will erupt again and we will again be firing at them," he said, visiting a navy base.

A Palestinian official with knowledge of the Cairo talks told Reuters, on condition of anonymity: "So far we can't say a breakthrough has been achieved ... Twenty-four hours and we shall see whether we have an agreement."

Hamas also wants the opening of a seaport for Gaza, a project Israel says should be dealt with only in any future talks on a permanent peace agreement with the Palestinians.

Israel has resisted lifting the economically stifling blockade on Gaza and suspects Hamas will restock with weapons from abroad if access to the coastal territory is eased. Neighboring Egypt also sees Hamas as a security threat.

Israel pulled ground forces out of Gaza last week after it said the army had completed its main mission of destroying more than 30 tunnels dug by militants for cross-border attacks. It now wants guarantees Hamas will not use any reconstruction supplies sent into the enclave to rebuild those tunnels.

The Palestinian official said the Palestinian delegation had agreed that reconstruction in Gaza should be carried out by the unity government of technocrats set up in June by Hamas and the more secular Fatah party of Western-backed Palestinian President Mahmoud Abbas, who is based in the occupied West Bank.

 

WAR CRIMES INVESTIGATION

Israeli representatives are not meeting face-to-face with the Palestinian delegation because it includes Hamas, which Israel regards as a terrorist organization. Hamas for its part is sworn to Israel's destruction.

In Gaza, many families have returned to areas they had been forced to leave by the Israeli army, but some found their homes had been shelled or bombed. Some people pitched tents, while others spent the night in their homes if they could.

Children looked for toys in the rubble. One boy was happy to find his bicycle, pushing it along even though the tires had been punctured.

"It is not safe yet but we miss our homes, we miss our neighborhood, so we come to sit with friends and chat about our fate," said Abu Khaled Hassan, 50.

Israeli naval forces fired warning shots at a Palestinian fishing boat which broke the naval blockade on Tuesday, the military said. Gaza officials said no one was hurt and the incident did not appear to threaten the truce.

A Palestinian died of wounds from the war on Tuesday, Gaza hospital officials said, bringing to 1,939 the territory's mostly civilian death toll since the July 8 launch of Israel's military campaign to quell cross-border Hamas rocket fire.