Gaza City, Nov 14 (AFP) Exchanges of fire triggered by Israel's targeted killing of a top militant in Gaza raged for a second day and showed little sign of easing as the Palestinian death toll surged to 26.

Fresh rocket barrages were fired at Israel, which responded with strikes on what it said were Islamic Jihad militant sites and rocket-launching squads in the Gaza Strip. On Wednesday afternoon, it said it targeted two Islamic Jihad militants preparing to fire anti-tank missiles.

Air raid sirens wailed and fireballs exploded as air defence missiles intercepted rockets, sending Israelis rushing to bomb shelters.

In Gaza, residents surveyed damage and mourned the dead outside a mortuary and at funerals.

UN envoy Nickolay Mladenov arrived in Cairo on Wednesday afternoon, airport officials said, following reports he was to hold talks on halting the fighting.

The UN and Egypt have been instrumental in mediating previous ceasefires between Israel and Gaza-based militants.

But a source close to the discussions aimed at mediating a truce warned that the risk of further escalation remained high.

Israeli Prime Minister Benjamin Netanyahu said Islamic Jihad must stop its stop rocket attacks or "absorb more and more blows".

He reiterated his warning that "this could take time" and said Israel would respond to attacks "without mercy".

Islamic Jihad spokesman Musab al-Barayem said the group was not interested in mediation for now as it retaliated to the killing of one of its commanders.

Israel killed senior Islamic Jihad commander Baha Abu al-Ata and his wife Asma in a targeted strike early Tuesday, prompting barrages of tit-for-tat rocket fire and air strikes.

According to Israel, Ata was responsible for rocket fire at Israel as well as other attacks and was planning more violence, with the military calling him a "ticking bomb."

The flare-up raised fears of a new all-out conflict between Israel and Palestinian militants in Gaza, who have fought three wars since 2008.

A total of 26 Palestinians had been killed by Wednesday evening, including Ata and his wife as well as three children, according to Gaza's Hamas-run health ministry.

Islamic Jihad confirmed the dead included other members of its armed wing, while the health ministry said three children were also among the dead, and that more than 70 people were injured.

Since Israel's killing of Ata in what was believed to be a drone strike, at least 360 rockets have been fired into Israel from Gaza and dozens have been intercepted by air defences, according to the army.

There have been no Israeli deaths, though damage has been caused and one rocket narrowly missed cars on a busy highway.

Israeli medics said they had treated 48 people with light wounds, while schools were closed in areas near the Gaza border for a second day running.

Schools in the blockaded Gaza Strip, an enclave of two million people, have been closed since Tuesday.

Unusually and in a sign it was seeking to avoid a wider conflict, Israel's announced targets were confined to Islamic Jihad sites and not those belonging to Hamas.

It normally holds Hamas, the Islamist movement that rules the Gaza Strip, responsible for all rocket fire from the enclave as the territory's de facto rulers. Israeli analysts were quick to highlight the change of approach.

"For the first time in the current era, Israel drew a distinction between Hamas and Islamic Jihad," commentator Ben Caspit wrote in Israeli newspaper Maariv.

"By so doing, Israel deviated from its iron-clad principle that Hamas, as the sovereign power in Gaza, has to pay the price for any action taken by anyone in the Gaza Strip. That is now no longer the case." Islamic Jihad is the second most-powerful militant group in the Gaza Strip after Hamas and has taken responsibility for rocket fire.

Hamas, however, said it would not abandon its ally.

"As long as the Israeli warplanes bomb the Gaza Strip, the resistance will respond to the Israeli aggression and defend the Palestinian people," a joint statement from Gaza militant groups said.

The flare-up comes at a politically sensitive time for Israel.

A September 17 general election ended in a deadlock and a new government is yet to be formed.

It was the second election since April, when polls also ended inconclusively.

The violence has drawn international calls for calm. (AFP)

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