By Nidal al-Mughrabi
GAZA (Reuters) - Palestinians faced even grimmer conditions in the Gaza Strip Thursday after a U.N. aid agency halted work, saying its staff were at risk from Israeli forces fighting Hamas militants, after two drivers were killed.
Israel also came under sharp Red Cross criticism that it was delaying access to casualties.
Gaza medical officials and the Red Crescent recovered 35 more bodies from battle areas of north and east Gaza, raising the reported Palestinian death toll to 765.
Despite the hellish conditions for the 1.5 million Palestinians crammed into the coastal strip, international efforts to secure a cease-fire have yet to bear fruit.
But the United States, Britain and France dropped objections to a binding U.N. resolution on the Gaza crisis and were working on one calling for an immediate cease-fire, diplomats said.
It would also include the need for action to stop smuggling of arms to Hamas militants and to open Gaza's border crossings.
Neither Israel nor Hamas yet agrees to an Egyptian-European proposal that has U.S. support. Hamas says any cease-fire must end the Israeli-led blockade and Israeli cross-border raids.
As diplomacy grinds on, relief agencies face grave risks.
"UNRWA decided to suspend all its operations in the Gaza Strip because of the increasing hostile actions against its premises and personnel," said Adnan Abu Hasna, a Gaza spokesman for the United Nations Relief and Works Agency (UNRWA).
The decision followed the deaths of two Palestinian forklift drivers in an UNRWA convoy hit by an Israeli tank shell. All convoys ferrying humanitarian supplies from at least two key crossing points with Israel were suspended after the incident.
UNRWA provides food and other aid to some 750,000 Gazans. Its work would be suspended "until the Israeli army can guarantee the safety and security of our staff," agency spokesman Christopher Gunness said in Jerusalem.
Israeli fire has hit two UNRWA schools, killing more than 45 Palestinians, medical officials in Gaza said.
At least 11 Israelis have been killed, eight of them soldiers, including four hit by "friendly" fire, since the Israeli assault began on December 27.
Israel is bent on halting Hamas rocket fire on its southern towns. Prime Minister Ehud Olmert said the goal that "quiet will reign supreme" in the area had not been achieved. A decision on further military action "is still ahead of us," he said.
More than a dozen rockets hit southern Israel Thursday.
In Washington, the Senate adopted a bipartisan resolution "reaffirming Israel's inalienable right to defend against attacks from Gaza," majority leader Harry Reid said.
"I ask any of my colleagues to imagine that happening here in the United States. Rockets and mortars coming from Toronto in Canada, into Buffalo, New York. How would we as a country react?"
The International Committee of the Red Cross (ICRC) said its officials and Palestinian ambulance workers had found four starving Gaza children huddled with at least 12 corpses in a house 80 metres (yards) from an Israeli military position.
Among the dead in the house, found lying on mattresses, were the children's mothers, the ICRC said.
In nearby houses in Gaza's devastated Zeitoun neighbourhood, the team found another three corpses and 15 survivors, including several who were wounded, the Geneva-based agency said.
ACCUSATIONS OF DELAY
The ICRC accused Israel of delaying ambulance access to the battlefield. It said the army must have known of the situation but did not help the wounded, in violation of international law.
"This is a shocking incident," said Pierre Wettach, ICRC chief for Israel and the occupied Palestinian territories.
Israel said it would investigate any formal complaint.
A rocket salvo from Lebanon into northern Israel briefly raised fears that Hezbollah fighters were opening a second front to relieve pressure on Gaza. But Israeli cabinet ministers made clear they believed Palestinian groups in Lebanon were to blame.
Police said one rocket tore a hole in the roof of an old people's home, wounding two people, in the town of Nahariya.
The army, which fought a 34-day war with Shi'ite Hezbollah guerrillas in 2006, responded only with a few artillery rounds. There were no reports of casualties in Lebanon.
The commander of U.N. peacekeepers in Lebanon urged "maximum restraint" and the Beirut government criticised the perpetrators for violating the U.N. resolution that halted the 2006 war.
In the Gaza Strip, Israeli air strikes and ground attacks killed at least nine civilians and three gunmen, medical officials said. The army said one Israeli soldier was killed.
The Palestinian dead included two brothers aged six and 13, killed when an Israeli air strike missed a group of Islamic Jihad fighters in Abassan in the southern Gaza Strip.
A Ukrainian woman, who had refused to leave Gaza, and her son were killed when a tank shell hit their house, medics said.
In the occupied West Bank, Israeli police shot dead a Palestinian who tried to set fire to a petrol station at a Jewish settlement, police said.
Israel again suspended its assault briefly Thursday to help Gaza's inhabitants stock up on much-needed supplies. The army observed a similar three-hour lull Wednesday.
While pursuing its Gaza war, Israel has said it accepts the "principles" of the European-Egyptian cease-fire proposal. Washington has urged Israel to study the plan.
Officials of Hamas, shunned by the West for rejecting Israel and espousing violence, said the group was still considering it.
European governments have offered to back the proposal with an EU border force to stop Hamas, which took over Gaza in 2007, from rearming via tunnels under the border with Egypt.
The plan would also address Palestinian calls for an end to Israel's economic blockade of the Gaza Strip. Hamas called off a six-month cease-fire late last month, accusing Israel of breaking an agreement to open border crossings to more supplies.
(Additional reporting by Yara Bayoumy in Beirut, Nidal al-Mughrabi in Gaza and Allyn Fisher-Ilan and Dan Williams in Jerusalem; writing by Alistair Lyon; Editing by Samia Nakhoul)