Gun battles are raging between Hamas militants and Israeli forces after the Islamist group launched a surprise attack on Israel from Gaza, in a dramatic conflict escalation.

Hundreds of people have been killed on both sides since the Iran-backed Hamas launched the multi-pronged assault at dawn on Saturday, with Israeli forces fighting holdout militants and pounding the Gaza Strip with air strikes.

This is what we know about the conflict so far:

How it unfolded

The army said hundreds of Hamas militants attacked Israel from around 6.30am (4.30am Irish time) on Saturday, the Jewish holiday of Simchat Torah, in an assault that also came 50 years after the outbreak of the 1973 Arab-Israeli war.

The Islamist group fired thousands of rockets into Israel from Gaza as its militants used explosives and bulldozers to break through the fence surrounding the blockaded Palestinian enclave, multiple sources said.

Using motorbikes, pickup trucks, motorised gliders and speed boats, the militants streamed into Israeli urban areas including Ashkelon, Sderot and Ofakim, which is about 22km from Gaza.

The gunmen attacked a rave party attended by hundreds of young Israelis near Kibbutz Reim, close to Gaza, Israeli media reported.

Hamas seized Israeli military equipment and took an unknown number of Israelis and civilians hostage. Israeli news website Ynet said there were "dozens of Israeli captives, including numerous women, children and elders".

The militants overran several locations inside Israel, including a Sderot police station where they were engaged in a shootout with Israeli forces on Sunday.

How Israel is responding

Prime Minister Benjamin Netanyahu has vowed to reduce to "rubble" Hamas hideouts in Gaza, an impoverished enclave of 2.3 million people hemmed in by an Israeli blockade for more than 15 years.

The army said it has deployed tens of thousands of soldiers to fight the militants in southern desert regions of Israel near Gaza.

It has also carried out air strikes on Hamas positions inside Gaza, in an operation it has dubbed "Sword of Iron".

Army spokesman Richard Hecht said the air raids had struck 426 targets including Gaza tunnels, buildings and other infrastructure.

The military said it aims to rescue Israeli hostages and then evacuate the entire region within 24 hours.

Analysts say Israel was caught off-guard by the attack.

Hundreds killed

Israel says Hamas gunmen have killed more than 200 people and wounded over 1,000 in Israeli cities, towns and kibbutz communities.

The military has released the names of 26 killed soldiers.

AFP journalists have seen the bodies of civilians lying on the streets in at least three locations in Israel: the city of Sderot, the nearby kibbutz of Gevim and Zikim beach north of the Palestinian coastal enclave.

An unknown number of people were reportedly killed at the rave.

On the Gaza side, at least 313 people have been killed and more than 1,700 were reported wounded.

Thailand said this morning that two of its citizens were killed in the violence. Cambodia has confirmed the death of a Cambodian student who had been in Israel when Hamas attacked.

A London-born man who was serving in the Israeli army died on the Gaza border, his family said, and another British man is missing.

Two Ukrainian wome died during the latest escalation, both of whom had been living in the country for a long time.

What Hamas says about the offensive

Hamas said it fired 5,000 rockets in an offensive it has branded "Operation Al-Aqsa Flood".

Its chief Ismail Haniyeh yesterday vowed to press ahead with "the battle to liberate our land and our prisoners languishing in occupation prisons".

Hamas has called on "resistance fighters in the West Bank" as well as in "Arab and Islamic nations" to join the battle.

Early this morning, Lebanon's Iran-backed Shia militant group Hezbollah said it launched missiles and artillery shells into northern Israel "in solidarity" with the Hamas offensive.

The Israeli army said it retaliated with artillery fire.

Elsewhere, in Egypt, a policeman opened fire randomly at an Israeli tour group in the northern city of Alexandria, killing two Israelis and one Egyptian.

How the world has reacted

United Nations Secretary-General Antonio Guterres condemned "in the strongest terms" Hamas' attack on Israel and called for "diplomatic efforts to avoid a wider conflagration".

The West, much of which has designated Hamas a "terrorist" organisation, have also condemned the Islamist group's assault on Israel.

President Joe Biden said the United States' support for its key ally Israel was "rock solid and unwavering". A White House official said talks with Israel on military aid were "very much underway".

The European Union chief Ursula von der Leyen said: "I unequivocally condemn the attack carried out by Hamas terrorists against Israel."

Taoiseach Leo Varadkar condemned the "appalling" surprise attacks by Hamas and called for an end to hostilities.

Russia called for an "immediate ceasefire".

In Iran, a senior adviser to supreme leader Ayatollah Ali Khamenei expressed support for the Hamas attack, calling it a "proud operation".

Saudi Arabia called for an "immediate halt to the escalation between the two sides, protection of civilians, and self-control".

Turkish President Recep Tayyip Erdogan, who strongly supports the Palestinian cause, urged both sides to "stay away from impulsive steps that raise tensions".