GAZA/JERUSALEM (Reuters) - Palestinian militant group Islamic Jihad and Israel declared a halt to hostilities across the Gaza Strip border on Thursday but a lasting ceasefire appeared tenuous as they differed on terms.

Islamic Jihad said an Egyptian-mediated truce went into effect at 0330 GMT, about 48 hours after Israel triggered the exchange of fire by killing the Iranian-backed faction’s top Gaza commander in an air strike, deeming him an imminent threat.

Occasional rocket fire from Gaza and a retaliatory Israeli air strike broke the calm, but the ceasefire largely held.

Gaza medical officials have put the death toll from the two days of fighting at 34 Palestinians, almost half of them civilians and including eight children and three women.

Hundreds of rocket launches by militants had paralyzed much of southern Israel and reached as far north as Tel Aviv, sending entire communities to shelters. Dozens of Israelis were hurt.

Hamas, Gaza’s dominant faction, appeared to have stayed out of this round of fighting. That may have helped stem escalation.

Israeli Prime Minister Benjamin Netanyahu said the military operation was drawing to a conclusion with its goals met. “Our enemies got the message - we can reach anyone,” Netanyahu said, as he visited soldiers at a missile interception battery.

Islamic Jihad said Israel had accepted its demand to stop both the targeted killing of militants and sometimes lethal army gunfire at weekly Palestinian protests on the Gaza border.

“The ceasefire began under Egyptian sponsorship after the Occupation (Israel) submitted to the conditions set by Islamic Jihad on behalf of Palestinian resistance factions,” Islamic Jihad spokesman Musab Al-Braim said.

But Israel said it would observe only a limited quid pro quo. “Quiet will be answered with quiet,” Foreign Minister Israel Katz told Army Radio.

MISSILE STRIKE

In the deadliest incident of the two-day hostilities, eight members of a Gaza family were killed by an Israeli missile strike shortly before the truce took hold, said medical officials and residents.

They said all were civilians. But Israeli military spokesman Lieutenant-Colonel Avichay Adraee said the head of the family, Rasmi Abu Malhous, who was among the dead, was the commander of Islamic Jihad rocket crews in the central Gaza Strip.

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Neighbors left their homes to help rescue workers pull out the bodies of the family, some of which were completely buried in sandy earth. Civilians tried to test the pulse of one body before pulling it out.

Israel’s allegation about Rasmi Abu Malhous could not immediately be confirmed by Reuters. Islamic Jihad did not claim him as a member.

Neither the hostilities nor efforts to halt them shifted the dynamics of the underlying core conflict.

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While Hamas has been open to long-term truces, it refuses, like Islamic Jihad, to accept permanent co-existence with Israel.

Gazans are seeking to end years of an Israeli-led blockade. Refugees from the 1948 war of Israel’s founding and their descendents make up most of the 2 million Palestinians in Gaza and want the right to return to their families’ former lands.

Israel rejects that as demographic suicide and sees no means of making peace as long as Hamas and Islamic Jihad are armed.

Katz said there would be no change to Israeli military policy in Gaza, contradicting the assertion of Islamic Jihad.

Targeted killings “will not cease”, he said, and “the open-fire policy for which the Israel Defence Forces is responsible (at the Gaza border) will not change”.

Markets in Gaza reopened as life returned to normal, although people expressed mixed feelings about the truce.

“We responded and made clear our blood was not shed in vain. Also a truce is good because we don’t want our people to suffer more under the blockade,” said one resident, Mohammad Al-Smairi.

U.N. mediator Nickolay Mladenov said the Gaza situation remained fragile, tweeting: “All must show maximum restraint and do their part to prevent bloodshed. The Middle East does not need more wars.”