US secretary of state Antony Blinken vowed American support to Israel on Thursday as Tel Aviv's military pulverised the Hamas-ruled Gaza Strip with air strikes and prepared for a possible ground invasion.

As Palestinians tried to stock up on bread and groceries amid dwindling supplies, Israel said nothing would be allowed into Gaza until the around 150 hostages taken captive by Hamas during the weekend's attack were freed.

International aid groups warned of a worsening humanitarian crisis after Israel stopped all deliveries of food, water, fuel and electricity to the tiny enclave of 2.3 million people and prevented the entry of supplies from Egypt. The war has already claimed at least 2,700 lives on both sides.

“Not a single electricity switch will be flipped on, not a single faucet will be turned on, and not a single fuel truck will enter until the Israeli hostages are returned home,” Israeli energy minister Israel Katz said on social media.

Lt Col Richard Hecht, an Israeli military spokesman, told reporters on Thursday that forces “are preparing for a ground manoeuvre” should political leaders order one. A ground offensive in Gaza, where the population is densely packed into a sliver of land only 40km long, would likely bring even higher casualties on both sides in brutal house-to-house fighting.

As Israel pounds Gaza from the air, Hamas militants have fired thousands of rockets into Israel.

Palestinians fleeing air strikes in Gaza could be seen running through the streets, carrying their belongings and looking for a safe place.

The number of people who had fled their homes in Gaza soared by 30 per cent within 24 hours, reaching 340,000 people by Wednesday night. Most crowded into UN-run schools while others were staying with relatives or even strangers who let them in.

Lines formed outside bakeries and grocery stores during the few hours they dared open, as people tried to stock up before shelves emptied. On Wednesday, Gaza’s only power station ran out of fuel and shut down, leaving only lights powered by scattered private generators.

Hospitals, overwhelmed by a constant stream of wounded and running out of supplies, have only a few days worth of fuel before their power cuts off, aid officials say. The cut-off has also caused a dire water shortage for over 650,000 people, according to the UN.

“Without electricity, hospitals risk turning into morgues,” warned Fabrizio Carboni, regional director of the International Committee of the Red Cross. When power runs out, it puts “newborns in incubators and elderly patients on oxygen at risk. Kidney dialysis stops, and X-rays can’t be taken,” he said.

With Israel sealing off the territory, the only way in or out is through the crossing with Egypt at Rafah. Egypt’s foreign ministry said it had not officially closed Rafah but air strikes were preventing it from operating. Egypt has been trying to convince Israel and the US to allow the delivery of aid and fuel through Rafah.

A new war cabinet, which includes an Opposition politician, is now directing the fight in Israel. Blinken’s visit underscored US backing for Israel’s retaliation.

“You may be strong enough on your own to defend yourselves, but as long as America exists you will never have to,” Blinken said after meeting with Prime Minister Benjamin Netanyahu in Tel Aviv. “We will always be there by your side.”

On Friday, Blinken is to meet Palestinian President Mahmoud Abbas, whose authority is confined to parts of the occupied West Bank, and Jordan’s King Abdullah II.

Israel captured the West Bank, along with Gaza and east Jerusalem, in a 1967 war. The Palestinians want all three territories for their future state, but there have been no peace talks in over a decade.

In Gaza, the Israeli military said overnight strikes targeted Hamas’s elite Nukhba forces, including command centres used by the fighters who attacked Israel on Saturday, and the home of a senior Hamas naval operative that it said was used to store unspecified weapons. Other air strikes killed commanders from two smaller militant groups, according to media linked to those organisations.

“Right now we are focused on taking out their senior leadership,” Hecht, the military spokesman, said of Hamas. “Not only the military leadership, but also the governmental leadership, all the way up to (top Hamas leader Yehia) Sinwar.” Drone footage filmed by The Associated Press revealed extensive damage at the Shati refugee camp, in the north of Gaza, following overnight air strikes. Residents picked their way through the rubble as fire and rescue crews looked for survivors.

While Israel has insisted that it is giving notice of its strikes, it is employing a new tactic of levelling whole neighbourhoods, rather than just individual buildings.