JERUSALEM (Reuters) - Israeli Prime Minister Ehud Olmert on Thursday issued a “last-minute” appeal to Palestinians in the Gaza Strip to reject their Hamas rulers and stop rocket fire at Israel, warning them he would not hesitate to use force.

Israel's Prime Minister Ehud Olmert attends the weekly cabinet meeting in Jerusalem December 21, 2008. REUTERS/Gali Tibbon/Pool

His comments were the clearest indication yet that Israel was preparing a possible Gaza offensive which could result in heavy casualties on both sides and fuel a humanitarian crisis.

Israeli political sources said Olmert’s security cabinet approved a “staged” military escalation, beginning with air strikes against a wider range of Hamas targets in the densely-populated enclave.

A large-scale operation has yet to be authorized but could get a green light depending on Hamas’s response, the sources said.

In Gaza, Hamas spokesman Fawzi Barhoum said Israel would “pay the price” for any attack.

Olmert told Al Arabiya television, an Arab broadcaster widely watched in Gaza: “I didn’t come here to declare war.”

“But Hamas must be stopped -- that is the way it is going to be. I will not hesitate to use Israel’s might to strike Hamas and (Islamic) Jihad. How? I will not go into details now,” Olmert said, according to a statement issued by his office.

Olmert has resisted calls within Israel for a major military operation against Hamas, but rocket and mortar fire from the coastal enclave since a six-month truce brokered by Egypt expired last week has increased pressure on him to act.

Israeli Foreign Minister Tzipi Livni, a leading candidate to replace Olmert in a February 10 election, held emergency talks with Egyptian President Hosni Mubarak, in Cairo, who cautioned against an escalation.

ROCKET FIRE “UNBEARABLE”

Livni said Hamas had to pay for “unbearable” rocket fire, declaring: “Enough is enough.”

Adding to the saber-rattling, army chief Gabi Ashkenazi said Israel would have to act with “all our force to hurt the terrorist infrastructure and change the security reality.”

In a sign any fighting with Gaza ran the risk of igniting a wider war, Lebanese troops dismantled eight rockets set up for launch at Israel in a border village. Israel fought an inconclusive war with Hezbollah guerrillas in Lebanon in 2006.

Egypt appealed to Hamas leaders after the talks with Livni “to calm the situation so as to avoid an Israeli military escalation,” a Palestinian official said in Gaza.

In response to world appeals and a reduction in rocket fire from Gaza, Israel agreed later to let about 100 trucks carrying food, humanitarian aid, grain and animal feed travel into Gaza on Friday through two crossings, officials on both sides said.

Israel has tried to weaken Islamist Hamas by keeping the Gaza Strip’s border crossings closed, increasing hardship for the territory’s 1.5 million residents. But there is little doubt that Hamas has control and can counter internal challenges.

Since the ceasefire ended on Friday, more than 200 rockets and mortar shells have been fired at Israel, causing damage but few injuries, the Israeli army said. In the same period, six Gaza militants have been killed in Israeli attacks.

But rocket fire from Gaza declined to 16 launches on Thursday, from dozens the day before.

In the Al Arabiya interview, Olmert issued what amounted to a public call to Gazans to overthrow their Hamas leaders to prevent an escalation with Israel.

“I’m telling them now. It may be the last minute. I’m telling them. Stop it. We are stronger. There will be more blood there. Who wants it? We don’t want it,” Olmert said.

Olmert questioned whether Hamas’s stance was consistent with Islam. “Is the spirit of Islam to kill innocent children, to fire rockets at kindergartens and civilians? I don’t think that is the spirit of Islam,” Olmert said.