GAZA: Palestinians in Gaza are preparing for an Israeli offensive of unprecedented scale after Saturday's deadly Hamas raid, with more than 130,000 fleeing their homes and stockpiling supplies as air strikes pound the crowded enclave with 560 already dead.

Amid an intensified Israeli siege cutting off water, food and power, and a sudden new assault, conditions look worse than at any point since Palestinian refugees flocked there during the 1948 fighting when Israel was founded.

Israeli military phone messages have warned people to leave some areas, indicating a new ground attack that could eclipse previous bouts of destructive warfare in the dense concrete townships that grew up in Gaza's original tented refugee camps.

"Where should we go? Where should we go?" asked 55-year-old Mohammad Brais.

He had fled his home near a possible front line to shelter at his shop - only for that to get hit in one of the hundreds of air and artillery strikes already pounding Gaza.

The surprise Hamas attack on Saturday caused Israel its bloodiest day, as fighters smashed through border defences and marauded through towns, killing more than 800 people and dragging more than 100 into captivity in Gaza.

Israeli Defence Minister Yoav Gallant warned that the price Gaza would pay "will change reality for generations" and Israel was imposing a total blockade with a ban on food and fuel imports as part of a battle against "human animals".

At the Jabalia refugee camp in northern Gaza, men clambered on a pancaked building to pull an infant's tiny body from the rubble, carrying it down through the crowd below amid still-smouldering remains of bombed buildings. That air strike left dozens killed and injured, according to the territory's health ministry.

As ambulances arrived at a hospital, workers ran out to haul in stretchers bearing the injured. Inside, a man lay next to the shrouded body of his nephew, hysterical with grief, alternately striking the floor and embracing the corpse as he screamed.

Funeral processions wound down Gaza streets. In Rafah, in the south, men strode behind a body being carried on a bier, Palestinian and Hamas flags raised behind.

At the cemetery a family buried Saad Lubbad, a small boy killed in air strikes. His body, wrapped in white, was passed down to be laid on a patterned cloth before burial.

FOOD AND FUEL

The densely populated enclave's 2.3 million residents have endured repeated bouts of war and air strikes before.

They expect this one to be worse.

"It doesn't need much thinking about. Israel suffered the biggest loss in its history so you can imagine what it is going to do," said a resident of Beit Hanoun on Gaza's northeastern border with Israel.

"I took my family out at sunrise and dozens of other families did the same. Many of us got phone calls, audio messages from Israeli security officers telling us to leave because they will operate there," he said.

Families began stockpiling food as soon as Saturday's attack began but fear that despite Hamas assurances supplies will run low.

With Israel cutting off electricity supplies into Gaza, a looming fuel shortage means private generators as well as the enclave's own power station, which is still providing about four hours of energy a day, will struggle to function.

Electricity shortages mean residents cannot recharge phones, so are cut off from news of each other and from events, and are unable to pump water into rooftop tanks.

At night the enclave is plunged into total darkness, punctuated by the blasts of air strikes.

Gaza health ministry officials said hospitals were expected to run out of fuel, needed to power lifesaving equipment, in two weeks. United Nations Secretary General Antonio Guterres said 137,000 people were sheltering in U.N. schools and other facilities.

At one in Gaza City, 13-year-old Israa al-Qishawi pointed to the corner of a classroom where she lays her mattress each night alongside 30 other people.

Fear makes her want the toilet every few minutes, she said, but there is no water.

"It is disgusting," she said.

Dressed in green and playing with a hula hoop, she said: "The war came suddenly and we are afraid of it".

BOMBARDMENT

Air strikes have damaged and blocked streets, making it harder for ambulances and rescue vehicles to reach bomb sites, according to residents and medics. The civil defence said it could not cope with so many bomb sites, and asked for foreign rescue teams to help it save survivors trapped under rubble.

The Beit Hanoun resident said the bombardment of streets seemed like preparation for another Israeli ground offensive, like ones he watched rolling into Gaza from the roof of his house in 2008 and 2014.

Recorded phone messages and social media posts issued by Israel's military warning residents to quit some Gaza areas added to residents' fears.

Despite the danger, the 45-year-old was pleased by Hamas' raid into Israel, he said, requesting anonymity for fear of Israeli reprisals.

"We are afraid but still we are proud like never before," he said, adding: "Hamas wiped out entire Israeli army battalions. It crushed them like biscuits".

Standing outside his ruined shop, near wrecked houses where three entire families were killed, Brais said he just hoped for an end to Gaza's endless cycle of destruction.

"Enough. We had enough. I am 55-years-old and I spent those years going from one war into another. My house has been destroyed twice," said Brais. "Everything is gone," he said, looking at the wreckage of his shop.