Arab League chief Nabil al-Arabi accused Israel on Wednesday of "blocking" all attempts to end the Gaza conflict, a day after the collapse of a ceasefire in the Palestinian territory.

"Israel is blocking any kind of agreement leading to calm" in the Gaza Strip, Arabi told journalists.

Several thousand mourners on Wednesday joined the funeral procession for the wife and baby son of Hamas's military commander Mohammed Deif, angrily demanding revenge against Israel.

Firing Kalashnikovs into the air, they carried the bodies of 27-year-old Widad and her seven-month-old son Ali, who were among at least four people killed in a deadly air strike on Gaza City late on Tuesday.

The United States blamed rocket fire from Gaza for a breakdown in indirect talks between Israel and Palestinian authorities on a durable ceasefire Tuesday, and said Hamas bore responsibility.

"Hamas has security responsibility for Gaza... Rocket fire came from Gaza," State Department spokeswoman Marie Harf said, blaming the Palestinian Islamist group for renewed fighting.

Israel and Palestinian militants resumed fire across the Gaza border on Tuesday, sparking panic across the war-torn enclave and halting truce talks.

Gaza emergency services said that a woman and a child were killed and 16 people injured in one strike in Gaza City.

Arab Bank, on trial in New York for allegedly supporting terrorism, is one of the biggest and most prestigious Arab banking giants in the world.

Founded in 1930 by Abdel Hamid Shoman, a Palestinian from Jerusalem who worked as a peddler in New York then returned home to start his empire, it started out as the first private sector financial institution in the Arab world.

Palestinian president Mahmud Abbas will travel to Doha on Wednesday and hold talks the next day with the emir of Qatar and Hamas exiled leader Khaled Meshaal, the Palestinian ambassador in Qatar said.

Israeli and Palestinian negotiators in Cairo faced a new midnight deadline Tuesday to end the bloodshed in Gaza after agreeing overnight to extend an existing truce by 24 hours.

News of the last-minute extension was confirmed by both sides shortly before a five-day ceasefire was to expire at midnight local time (2100 GMT Monday).

Negotiators in Cairo were pushing Israel and the Palestinians to put a decisive end to weeks of bloodshed in Gaza Monday as the clock ticked down on another temporary truce.

As the death toll in the war-torn Gaza Strip pushed over 2,000, Egyptian negotiators were pressing both sides to reach agreement before a midnight (2100 GMT) deadline which will mark the end of a five-day truce.

Prime Minister Benjamin Netanyahu warned Monday that Israel will hit back hard if Palestinian rocket attacks from Gaza resume, speaking just hours before the midnight expiry of a five-day ceasefire.

"We are ready for all scenarios... the army is ready to respond with force if the firing (of rockets) resumes," he said in a meeting with Defense Minister Moshe Yaalon in Ashdod, a statement said.

The death toll in Gaza rose above 2,000 on Monday, some seven weeks after Israel and Hamas embarked upon a bloody confrontation which has not yet formally ended.

Both sides are currently observing a five-day truce which is due to end at 2100 GMT as negotiators work to secure a permanent end to hostilities.