By Nidal al-Mughrabi and Dan Williams
GAZA/JERUSALEM, Israel (Reuters) -Israel killed the head of Islamic Jihad's rocket force and his deputy, pressing an operation that has cost 30 lives in Gaza including women and children, while Palestinian cross-border rocket salvoes inflicted a first fatality in Israel on Thursday.
Amid mediation efforts by Egypt, neither side seemed ready to douse the worst flare-up since August, now in its third day.
"We are at the height of a campaign, both offensive and defensive," Israeli Prime Minister Benjamin Netanyahu said in a videotaped statement issued during a visit to an air base.
"Whoever comes to harm us - his blood is forfeit."
The deaths of Ali Ghali and Ahmed Abu Daqqa brought to five the number of senior figures from Iranian-sponsored Islamic Jihad killed since Israel began striking Gaza early on Tuesday.
Two gunmen from a splinter group died in a separate strike on Thursday. The identities of two men killed elsewhere were not immediately clear. Four women and six children have also died.
But Islamic Jihad, the second-biggest armed group in Gaza after the ruling Hamas Islamists, kept up volleys of rockets.
"We will not retreat and the assassinations will only make us stronger. Our revenge continues," it said in a communique.
The hundreds of rockets launched have set off sirens as far north as Tel Aviv. Some 1.5 million Israelis - 16% of the population - have been ordered to shelters, military spokesperson Rear-Admiral Daniel Hagari said.
While Iron Dome and David's Sling interceptors have shot down 96% of rockets engaged, according to the military, one hit a residential building in Rehovot on Thursday. Medics said an elderly man was killed, the first person killed in Israel in the latest round of fighting, and five other people were wounded.
After more than a year of resurgent Israeli-Palestinian violence that has killed more than 140 Palestinians and at least 19 Israelis and foreigners since January, the latest escalation drew international calls for a ceasefire.
But Cairo, which hosted senior Islamic Jihad official Mohammad al-Hindi for talks, was circumspect about prospects.
FRUITLESS MEDIATION SO FAR
"Egypt's efforts to calm things down and resume the political process have not yet borne fruit," Egyptian Foreign Minister Sameh Shoukry told reporters.
Meeting Jordanian, French and German counterparts in Berlin, Shoukry urged "peace-sponsoring countries to intervene and stop the attacks" and said Israel must "stop the unilateral measures that aim to destroy the future of the Palestinian state".
Islamic Jihad spurns coexistence with Israel and preaches its destruction. Among terms for a truce, it wants an end to Israeli strikes against its leaders. Israel has rejected that.
"We have resumed the 'elimination' policy - big time," Israeli Foreign Minister Eli Cohen told Channel 12 TV. "If and when we enter a ceasefire, it won't be with preconditions."
Israel appeared to be hoping that Islamic Jihad, depleted of rockets and commanders, would halt hostilities unilaterally. Hagari declined to be drawn on the faction's remaining arsenal.
Both in blockaded Gaza, where residents have been experiencing decades of a worsening humanitarian crisis, and in surrounding Israeli towns, schools and businesses remained shut.
"We can't sleep at night because we worry about bombardment," said Mohammad Abu el-Subbah, 24, outside a bakery in Gaza City. "People have no clue what will happen next, whether there will be a truce or the war will continue."
At least 80 people were wounded in the air strikes that destroyed five buildings and damaged more than 300 apartments, said Salama Marouf, chairman of the media office for Hamas, the group that rules the densely populated coastal territory.
Israel's military said over 100 rockets - many of them improvised - had fallen short, killing four Palestinians, including a 10-year-old girl. Islamic Jihad denied that.
"Once again Israel tries to escape its responsibility for the killing of civilians through fabrications and lies," faction spokesman Dawoud Shehab said.
Israel has kept crossings for the movement of people and goods closed since Tuesday. Israeli authorities estimated that between 30% and 60% of communities around Gaza have evacuated as a precaution. On Wednesday, sirens sounded as far as the commercial capital Tel Aviv, 60 km (37 miles) north of Gaza.
As the firing continued in Gaza, the military said it had arrested 25 people in the occupied West Bank associated with Islamic Jihad. In the West Bank town of Tulkarm, the Palestinian health ministry said Israeli forces shot dead a 66-year-old man. The military said troops returned fire after one of them was shot and wounded by gunmen.
Israel captured Gaza and the West Bank, areas Palestinians want for an independent state with East Jerusalem as its capital, in a 1967 war. Israeli forces and settlers withdrew from Gaza in 2005. Statehood talks have been frozen since 2014.
(Reporting by Ali Sawafta, Nidal al-Mughrabi and Henriette Chacar; Editing by Frank Jack Daniel, Nick Macfie, Bernadette Baum and Mark Heinrich, William Maclean)