Hospitals were struggling to deal with mounting casualties yesterday as Israeli troops became engaged in fierce battles with Palestinian fighters around Gaza City.

Around 550 Palestinians killed since Israel's assault began on Gaza 10 days ago include 200 civilians, Health Ministry officials in Gaza said.

Aid agencies warned that people in the region were facing "grave" shortages of food and water.

The Israeli military has promised it will allow 80 lorries of humanitarian aid and vital fuel supplies into the Gaza Strip -but Oxfam warned this was "not enough at all".

Medical aid agency Medecins Sans Frontieres said surgical services in Gaza were "overwhelmed" by the number of people wounded in the attacks.

US President George Bush insisted he wanted a ceasefire as "soon as possible", but Gaza City was wreathed in black smoke as shells rained down on its beleaguered inhabitants throughout much of the day.

After a week of air strikes, Israel launched a ground offensive on Saturday, sending hundreds of troops over the border and cutting Gaza in half.

Israeli Defence Minister Ehud Barak said the offensive would continue until the Jewish state achieved its objectives, principally an end to Palestinian rocket attacks on southern Israel.

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