Israel's ground invasion of Gaza on Thursday night followed two days of failed negotiations in Cairo that ran aground after Hamas's two central demands went unanswered by Israel and Egypt.

Representatives of the various Palestinian factions – including the Palestinian Authority under President Mahmoud Abbas, Hamas and the Gaza-based Palestinian Islamic Jihad – as well as Israel, Egypt and Tony Blair all met in Cairo to thrash out a deal, according to a participant in the negotiations.

Gamal Shobky, the Palestinian Authority's ambassador to Egypt, told the Guardian that the talks failed to reach a ceasefire agreement because Hamas could not persuade Israel and Egypt to make two significant concessions. First, Israel does not want to release a number of Palestinian prisoners recently recaptured by Israel despite their freedom being guaranteed by an earlier peace agreement. Second, Israel and Egypt are reluctant to ease a blockade of Gaza that has crippled the region's economy.

He said: "These are the two key issues – the prisoners, which Israel refused, and the opening of the borders, especially at Rafah [on the border with Egypt], and to allow for more movement on the sea, and to return farmland to Gaza."

With all sides refusing to back down, Shobky said that the prospects of an immediate ceasefire – in a conflict that has already killed more than 200 Palestinians and one Israeli – seemed remote. "I think we need more time, unfortunately."

Hamas stands increasingly isolated, after its usual Arab partners – Egypt, Abbas and the Arab League – all pressed the group to accept a ceasefire on lesser terms. Diplomats said the group was more involved in this second round of negotiations, after complaining of being left out of talks earlier in the week. But its tough negotiating position highlighted its estrangement from the international community, even with normally sympathetic Arab governments.

A western diplomat said: "The initial ceasefire proposal failed because it hadn't been cooked up with Hamas. Right now, Hamas are more involved. But unless Hamas are seen to get something, they'll probably keep firing. [And] the Egyptians and the Israelis are loth to give them anything."

Hamas's diplomatic isolation was highlighted on Thursday evening, when Egypt's president, Abdel Fatah al-Sisi, issued a joint statement with Abbas calling for an "immediate ceasefire to spare the blood of the Palestinian people in the Gaza Strip and safeguard lives" – a call that echoed Egypt's earlier ceasefire proposal on Monday, which Hamas also rejected.

Shortly after midnight, Egypt criticised Israel's ground attack – but only a few hours earlier, Egypt's foreign minister, Sameh Shoukry condemned Hamas's stubbornness. "If Hamas had accepted the Egyptian proposal, it could save the lives of at least 40 Palestinians," Shoukry said as Israel began its assault, in remarks quoted by Egypt's state-owned news agency.

Egypt's position is in sharp contrast to the role it played during the last round of Gazan hostilities in 2012, when Egypt's then-president, Mohamed Morsi, played a significant role in bringing about a ceasefire.

But Morsi, a member of the Muslim Brotherhood, the group that spawned Hamas, was deposed by Sisi last summer and is now in jail. Since his overthrow, Sisi's administration has banned Hamas from operating in Egypt, destroyed up to 1,200 tunnels that smugglers once used to bring crucial supplies to Gaza from Egypt, and accused the group of espionage and of aiding an armed insurgency in Egypt's Sinai desert.

As a result, Egyptian attitudes to the latest Gazan conflict are mixed, with some newspapers outright unsympathetic. "Hamas refused Egypt's initiative because of orders from the Brotherhood," read a headline in al-Watan, a pro-regime private newspaper.

Egypt "can't do any more" for Gaza, added columnist Makram Mohamed Ahmed in Egypt's flagship state newspaper, defending Egypt's decision to keep its border with Gaza closed and blaming Hamas for alienating Egypt.

"Hamas helped ruin Egypt's security, and interfered in Egyptian affairs, and participated in serious crimes now being reviewed by the Egyptian courts," said Ahmed. "They didn't bother to get things working again with Egypt, or even apologise for their crimes." These sentiments and developments have affected Egypt's ability to foster a peace deal between Hamas and Israel, since Hamas believes Cairo is increasingly acting in step with Israeli interests.

Given that even Morsi, a supporter of Hamas, could not lift Gaza's blockade, Hamas leaders doubt his hostile successors will be able to win them anything better. With Gaza's economy ruined, and a long-term peace deal out of the question, they may also feel they have nothing to lose by holding out for clearer concessions.