JERUSALEM (AP):

The United Nations halted deliveries to the Gaza Strip yesterday after gunfire from an Israeli tank killed an aid truck driver, and the international Red Cross said it would restrict activities after one of its drivers was injured in a similar incident.

The threat of a wider conflict arose when militants in Lebanon fired two rockets into northern Israel. One rocket crashed into a retirement home, but there were no serious injuries. Israel responded with mortar shells.

During a three-hour pause in the fighting to allow in food and fuel and let medics collect the dead, nearly three dozen bodies were found beneath the rubble of bombed out buildings in Gaza City.

Many of the dead were in the same neighbourhood where the international Red Cross said rescue workers discovered young children, too weak to stand, who had stayed by their dead mothers.

Relations between Israel and humanitarian organisations have grown increasingly tense as civilian casualties have mounted. The UN demanded an investigation after Israel earlier this week fired shells at a target next to a UN school filled with Gazans seeking refuge from fighting that has left nearly 750 Palestinians dead, according to Palestinian hospital officials and human rights workers.

Israel said militants had launched an attack from the area, and then ran into a crowd of civilians for cover. Nearly 40 Palestinians died.

"We've been coordinating with them (Israeli forces) and yet our staff continue to be hit and killed," said a UN spokesman, Chris Gunness, announcing the suspension.