Israel's army said on Saturday Gaza-based militants had used up or lost about half of their rockets in 12 days of fighting - though the Islamist fighters say they have been replenishing their arsenal.

The Israeli military said Palestinian terrorists had fired at least 1,705 rockets out of an estimated stockpile of about 10,000, a depletion of about 17 percent.

"I think that we have hit and destroyed 30 to 40 percent of the rockets," chief military spokesman Brigadier-General Moti Almoz said, referring to an Israeli offensive on Gaza that escalated on Thursday.

Israel says it has launched air strikes, naval barrages and a ground assault in Gaza, controlled by Islamist group Hamas, to halt rockets fired into Israeli territory. Analysts say Israel's estimates of the size of Hamas' remaining arsenal will be a key factor in its deliberations on how long to continue the offensive.

Palestinian officials said on Saturday the Israeli strikes have so far killed more than 330 people, most of them civilians.

The outgunned Palestinian terrorists do not publish details on their arsenals or deployment, but have said they are restocking as the conflict continues and are ready for a protracted war.

Neighboring Egypt has cracked down on Hamas over the past year and closed tunnels between its territory and Gaza, potentially hitting the militants' ability to smuggle in weapons and other supplies.

Reaching as far as Tel Aviv and beyond, the rockets have jarred Israelis. They have killed just one person, during this conflict, as their relative inaccuracy and the success of Israel's Iron Dome rocket interceptor, civilian air raid sirens and shelters kept the casualty rate in check.

A second Israeli was killed by a mortar fired from Gaza.

Hamas has accused Israel of hiding its losses and on Saturday dismissed the Israeli incursion into the Gaza Strip.

"The ground invasion has failed to achieve any goals and (our) heroic resistance has destroyed the image of Israeli deterrence to a great extent," said Hamas spokesman Sami Abu Zuhri.

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