A Palestinian salvages belongings after an Israeli strike in Rafah, Gaza Strip. AP

Mediator Qatar acknowledged on Saturday that prospects for a new pause in Israel's war with Hamas were "not really promising" as Israel rejected appeals to hold off on a threatened assault on the Gaza city of Rafah.

Prime Minister Benjamin Netanyahu said that foreign countries calling on Israel to spare the city, where 1.4 million Palestinians have sought refuge, were effectively telling the country to "lose the war".

Truce efforts intensified this week as Qatar and fellow mediators Egypt and the United States scrambled to secure a ceasefire before Israeli troops enter Rafah, the last major population centre in Gaza untouched by Israeli ground troops.

Despite a direct appeal from US President Joe Biden earlier this week, Netanyahu insisted the operation would go ahead regardless of whether a hostage release deal was agreed with Hamas.

"Even if we achieve it, we will enter Rafah," he said at a televised news conference Saturday.

A picture taken from Rafah shows smoke billowing during Israeli bombardment over Khan Yunis. AFP

Qatari Prime Minister Mohammed Bin Abdulrahman Al-Thani, who met with negotiators from both Israel and Hamas this week, said efforts for a ceasefire had been complicated by the insistence of "a lot of countries" that any new truce involve further releases of hostages.

"The pattern in the last few days is not really very promising," he said at the Munich Security Conference.

His assessment came as Hamas threatened to suspend its involvement in talks unless relief supplies are brought into the north, where aid agencies have warned of looming famine.

"Negotiations cannot be held while hunger is ravaging the Palestinian people," a senior source in the Palestinian group Hamas told the media, asking not to be identified as he is not authorised to speak on the issue.

Earlier, Hamas chief Ismail Haniyeh reiterated the group's demands, which Netanyahu called "ludicrous".

They include a complete pause in fighting, the release of Hamas prisoners and the withdrawal of Israeli troops from Gaza.

Netanyahu also rejected pressure from some Western governments for unilateral recognition of a Palestinian state.

"After the terrible massacre of October 7, there can be no greater reward for terrorism than that and it will prevent any future peace settlement," he said.

The hawkish premier was speaking as thousands of Israelis protested in Tel Aviv, calling for an immediate election and accusing the government of abandoning hostages.

"I am begging the prime minister and the cabinet to enter the negotiations," said former hostage Sharon Aloni-Cunio, who was released along with her twin children in November but whose husband remains in Gaza.

Agence France-Presse