Israel dramatically escalated the scope of its aerial assault in Gaza on Thursday, hitting hundreds of Hamas targets as the Palestinian death toll, including many civilians, continued to rise.

In two air raids, Palestinians reported at least 16 people killed in strikes that demolished two neighbouring homes – occupied by the same family – and a beachside cafe in the south of Gaza.

Palestinian hospital officials put the death toll at more than 80 and claimed half of those killed were women and children. Some accounts of the death toll said it had passed 90. There have been no reported Israeli casualties from the Hamas rockets being fired across the border.

Israeli military spokesman Lt Col Peter Lerner confirmed that Israel had struck more than 320 Hamas targets over Wednesday night and into Thursday morning, bringing the total number of targets hit to more than 750 in three days.

Lerner said Israel had mobilised 20,000 reservists for a possible ground operation into Gaza, but will for the time being remain focused on maximizing its air campaign. A ground invasion is a high-risk strategy that would doubtless lead to heavy Palestinian civil casualties and endanger Israeli ground troops.

Amid a rapidly mounting human cost, some in Gaza have been miraculously lucky even as their neighbours have died.

Mohammad Halabi was drinking coffee in his living room when the two missiles came. A trim and well-dressed man – a salaried employee of the Palestinian Authority – said the blast took off the front of the building, knocking down another separating wall and blowing a hole through into a room where his daughters were.

"It was 1.25 am. I was in the living room drinking coffee with my wife. The three children were in the bedroom. I can't tell you if it was two missiles or three," he said, his face pale and drawn, still stunned that his family had survived a strike that killed eight of his neighbours, including four women.

The target of the strike, Yassir al-Hajj, believed to be a member of Hamas's military wing, was not at home when the attack came. The Israeli media has reported that the al-Hajj family were delivered a warning shot before the strike, but there was no warning for Halabi or his other neighbours before the bombs flew in.

Despite claims from the Israeli military that its strikes have exclusively targeted militants, health officials in Gaza say that half of those to have died so far have been women and children.

Halabi said he had spent some $25,000 on an extension to his home a year and a half ago to accommodate his brothers' family. In his living room, the armchairs are coated with a thick layer of fine grey dust; a picture, blasted off the wall, lies on the floor, its glass broken.

In Halabi's daughters' room, the narrow beds are scattered with rubble. "Praise God, we were lucky! No one was injured in the house. But now we are staying with relatives. We have no choice," he said.

Asked about his dead neighbours, the al-Hajj family, he explained: "Everyone has an affiliation here. The man who lived there was Hamas. But not a senior leader. If he was, I would not have stayed living in my house. But that is no excuse for what they [Israel] did … "

In any case, it was not Yassir but his relatives who died, including two women, aged 22 and 59, and two young girls.

Almost as bloody was another attack on Khan Younis that came an hour or so earlier. A group of young men, their homes without electricity, had gone to watch the World Cup semi-final between Argentina and the Netherlands at a small beach cafe – a basic place offering little more than a canopy and a generator – when they were hit with an Israeli missile.

Nothing is left of the cafe now but a pile of sand, which on Thursday evening was still being combed by mechanical diggers looking for bodies.

"There was a strike further up the beach," said Mohammad al-Aqad, 23, who had been watching television in one of the neighbouring cafes. "We heard a jet and then the missile landed. They were neighbours and friends."

"We only ask for help from God," said Mahmoud Sawali, who said he lost at least two of his brothers in the attack. "I have two brothers who are martyrs, and I'm looking for the third."

The intensification of Israeli air strikes has been met with a increase of rocket salvoes fired from Gaza into Israel – the Israeli military said 442 projectiles had been fired since Tuesday, including nearly 100 on Thursday alone. Nine Israelis have been treated for injuries, dozens more for shock.

Israeli casualties have been prevented, in part, by the interception of Palestinian rockets by the US-funded Iron Dome aerial defence system. The anti-missile system has intercepted at least 70 projectiles destined for population centres in Israel.

The wail of air raid sirens has paralysed business in southern communities and sent hundreds of thousands of people scrambling for shelter in Tel Aviv, the country's commercial capital, where two rockets were shot down on Thursday. Offices and shops have remained open and roads are clogged with traffic.

The rapidly rising number of Palestinian civilian casualties has prompted senior Israeli figures to defend their strategy of targeting houses in densely populated civilian neighbourhoods, where the risk of civilian deaths is high.

Yigal Palmor, a spokesperson for the Israeli foreign ministry, accused Hamas of firing rockets from "within houses and streets and neighbourhoods which are populated with civilians … exposing these civilians to retaliation and to backfire."

The Israeli military has said it will investigate both the strikes on the al-Hajj family home and the beachside cafe, but has not offered an explanation as to why it is using missiles in densely populated neighbourhoods – a policy human rights groups say violates international human rights law.

According to Israeli media reports, the military intends to continue attacking the homes of senior militants. "The military's successes so far have been very significant," defence minister Moshe Yaalon said on Thursday. "We will continue until they understand that this escalation is not beneficial to them and that we will not tolerate rocket fire toward our towns and citizens."