Israel launches Gaza strikes over captured soldier

Palestinian militants also fired four rockets into southern Israel from Gaza, without causing any injuries.

Bracing for the offensive, militants had erected earthen mounds across roads and sealed off entrances to refugee camps in parts of Gaza, one of the most densely populated regions on earth.

Men, women and children packed into cars and a horse-drawn cart fled into Rafah from areas to the east as Israeli troops entered the territory while armed gunmen prowled the streets.

"All the people are leaving. They’re heading west because we’re afraid of the sweep, we’re escaping the invasion," said Auda Adwan, 20.

Armed groups have vowed not to release the soldier until all Palestinian women and children are freed from Israeli jails, a demand already rejected by Olmert.

"Israel is prepared for a long battle against Palestinian terror," Olmert said Tuesday. But he added: "Even in the difficult circumstances of recent days I declare that we will do everything in our power to hold negotiations with the Palestinians."