A baby died in an incubator at Gaza's largest hospital after the facility lost power, and another person was killed by an Israeli shell in intensive care, a spokesperson for the Palestinian health ministry said on Saturday.

Israel's military, which residents said had been fighting Hamas gunmen all night in and around Gaza City where the hospital is located, did not immediately respond to questions on the comments from health ministry spokesperson Ashraf Al-Qidra.

"The situation is worse than anyone can imagine. We are besieged inside the Al Shifa Medical Complex, and the occupation has targeted most of the buildings inside," said Qidra, who represents the health ministry in Hamas-controlled Gaza.

The Israeli military has said that Hamas militants who rampaged through southern Israel last month have placed command centres under Shifa hospital and others in Gaza, making them vulnerable to being considered military targets.

"The hospitals need to be evacuated in order to deal with Hamas. We intend on dealing with Hamas who have turned hospitals into fortified positions," it said in response to the question of whether it planned to enter Gaza hospitals at some point.

Hamas has denied using civilians as human shields and health officials say growing numbers of Israeli strikes on or near hospitals put at risk patients, medical staff and thousands of evacuees who have taken shelter in and near their buildings.

Qidra said Israeli army snipers commandeering rooftops of buildings near the hospital fired into the medical complex from time to time, limiting the ability of medics and people to move.

The Israeli military did not immediately respond to a request for comment.

The hospital suspended operations after fuel ran out, Qidra said, adding: "As a result, one newborn baby died inside the incubator, where there are 45 babies."

Hamas denies using the hospital for its military purposes and has asked the United Nations and the International Committee of the Red Cross to send missions to come to Shifa to investigate the Israeli allegations.

The Palestinian Health Ministry, which is based in the Israeli-occupied West Bank - separated from Gaza by Israel and run by a rival administration to Hamas - said separately that 39 babies were at risk at the hospital.

Minister Mai Alkaila had initially said they had died because they could not get oxygen or medicine to them and electricty was cut off, but the ministry later corrected the information to say that one had died and 39 were at risk.

"39 premature babies in Al-Shifa Medical Complex are threatened with death at any moment, and one of them died this morning. Failure to bring fuel into the hospitals will be a death sentence for the rest. The incubators will only be able to work until this evening, after which the fuel will run out."

Contacted again about the ministry's statement, Qidra reiterated that there was no electricity at the hospital and no internet.

"We are working hard to keep them alive, but we are afraid we may lose them in the coming hours," he said. "There is no electricity in the hospital completely."

On Friday, Gaza officials had said missiles landed in a courtyard of Al Shifa, killing one person and wounding others. Israel's military said later that a misfired projectile launched by Palestinian militants in Gaza had hit Shifa.

World Health Organisation Director-General Tedros Adhanom Ghebreyesus said health workers the group was in contact with at Shifa had been forced to leave the hospital in search of safety.

"Many of the thousands sheltering at the hospital are forced to evacuate due to security risks, while many still remain there," Tedros wrote on social media on Friday.