Palestinian militants launched their heaviest barrages against Israel since the 2014 Gaza war on Tuesday and Israeli aircraft struck back, in a surge of fighting after weeks of border violence.
Three Israeli soldiers were wounded by shrapnel, the military said, after dozens of mortar bombs and rockets were fired from the Gaza Strip, triggering warning sirens in southern Israel throughout the day. There were no immediate reports of Palestinian casualties.
Israel has long said it will not tolerate such attacks, and its warplanes hit more than 30 targets belonging to armed groups, including a cross-border tunnel under construction, the military said. It accused Gaza's dominant Hamas movement and the pro-Iran Islamic Jihad group of launching the salvoes.
There was no immediate claim of responsibility for the barrages, which came after Islamic Jihad vowed to take revenge for the killing of three of its members on Sunday by Israeli tank shelling.
Prime Minister Benjamin Netanyahu convened his security chiefs and Intelligence Minister Israel Katz said the country was "at the closest point to the threshold of war" since the seven-week conflict with Palestinian militants four years ago.
"If the firing [from Gaza] does not stop, we will have to escalate our responses and it could lead to a deterioration of the situation," Mr. Katz said on Army Radio.
Daoud Shehab, an Islamic Jihad spokesman, said Egyptian officials had been in contact with the group to try to restore calm. He said Islamic Jihad did not want the violence to escalate and blamed Israel for the flare-up.
"If Israel abides by calm and ceases all forms of aggression against our people in Gaza, we will also maintain calm," he said.
Lieutenant-Colonel Jonathan Conricus, a spokesman for the Israel Defense Forces (IDF), said the most extensive strikes from Gaza since the 2014 war also drew "the largest IDF retaliatory attack" since that conflict.
The Israeli military said more than 25 projectiles were fired on Tuesday. Several were shot down by its Iron Dome rocket interceptor system while others landed in empty lots and farmland.
One exploded in the yard of a kindergarten, damaging its walls and scattering the playground with debris and shrapnel, about an hour before it was scheduled to open for the day.
Violence has soared along the Gaza frontier in recent weeks, during which 116 Palestinians were killed by Israeli fire at mass demonstrations calling for Palestinians' right to return to ancestral lands now in Israel.
A Hamas spokesman defended Tuesday's attacks as a "natural response to Israeli crimes." An Islamic Jihad spokesman said "the blood of our people is not cheap."
Plumes of smoke and dust rose from the sites hit in the Israeli air strikes. The powerful explosions shook buildings nearby, causing panic among rush-hour crowds on streets and in markets. The Gazan Ministry of Education said shrapnel from one missile flew into a school.
Nickolay Mladenov, the United Nation's special coordinator for the Middle East peace process, said he was deeply concerned by "the indiscriminate firing of rockets by Palestinian militants from Gaza towards communities in southern Israel."
Amid international condemnation of its use of lethal force at the mass demonstrations that began on March 30, Israel said many of the dead were militants and that the Army was repelling attacks on the border fence.
Palestinians and their supporters say most of the protesters were unarmed civilians and Israel was using excessive force against them.
Off Gaza's coast on Tuesday, the Israeli navy intercepted a boat that organizers of the Palestinian border protests launched from the enclave in a challenge to an Israeli maritime blockade.
The military said the vessel was stopped without much incident and would be towed to the Israeli port of Ashdod where the 17 people on board would be questioned and then returned to the Gaza Strip.
More than 2 million Palestinians are packed into the narrow coastal enclave. Israel withdrew its troops and settlers from Gaza in 2005 but, citing security concerns, maintains tight control of its land and sea borders, which has reduced its economy to a state of collapse.
Egypt also restricts movement in and out of Gaza on its border.
This story was reported by Reuters. Ari Rabinovitch and Oriole's Lewis contributed to this report.