More than 900 Palestinian children are reported to have been injured by Israeli air strike since July 8

* More than 500 killed in densely-populated enclave

* 121 children killed, 900 wounded, UNICEF says

* More than 1.2 mln in Gaza have no or little water

* Ready-to-eat food stocks running low, WFP warns

* Three hospitals among 18 damaged health facilities

By Stephanie Nebehay

GENEVA, July 22 (Reuters) - Palestinian civilians in densely-populated Gaza have no place to hide from Israel's military offensive and children are paying the heaviest price, the United Nations said on Tuesday.

Israel pounded targets across the Gaza Strip, saying no ceasefire was near as U.S. and U.N. diplomats pursued talks on halting fighting that has claimed more than 600 lives as the conflict entered its third week.

"There is literally no safe place for civilians," Jens Laerke, spokesman of the U.N. Office for the Coordination of Humanitarian Affairs (OCHA), told a news briefing in Geneva.

The death toll is rising in the coastal enclave which has an estimated 4,500 people per square kilometer, he said. The priority for aid agencies was protecting civilians and evacuating and treating the wounded.

Nearly 500 homes have been destroyed by Israeli air strikes and 100,000 people have sought shelter in schools of the U.N. Relief and Works Agency (UNRWA), where they need food, water and mattresses, he said.

"This number continues to increase by the hour," UNRWA said in a statement on Tuesday, raising its emergency funding appeal to $115 million from $60 million.

Israel began air strikes on the coastal strip on July 8, saying it wanted to halt missile fire out of Gaza by Hamas militants, and launched a ground offensive last Thursday.

"The ongoing ground incursion, begun 18 July, has greatly accelerated the casualty rate over the past two days, as well as the numbers of displaced families," the World Health Organisation (WHO) said in a statement.

Twenty-nine Israelis, 27 of them soldiers, have died.

But the overwhelming majority of people killed so far in the conflict are Palestinians, including 121 Gaza children under age 18, Juliette Touma of the U.N. Children's Fund (UNICEF) said.

More than 900 Palestinian children are also reported to have been injured, according to UNICEF.

"According to an assessment by aid workers on ground at least 107,000 children need psycho-social support for the trauma they are experiencing such as death, injury or loss of their homes," Laerke said.

LIMITED WATER, HOSPITALS HIT

More than 1.2 million of the 1.8 million people in the enclave have no water or only limited access to water as power networks have been damaged or lack fuel for generators, he said.

"In addition, we do have reports of sewage flooding which is a threat to public health," Laerke said.

The U.N.'s World Food Programme (WFP) has distributed emergency food rations and food vouchers to more than 90,000 people so far, spokeswoman Elisabeth Byrs said.

"Ready to eat food stocks are running low in Gaza given the conflict has lasted two weeks and the needs are increasing," she said.

Food will be bought locally and also airlifted from Dubai.

The World Health Organisation (WHO) said that 18 health facilities in Gaza have been damaged, including three hospitals.

An Israeli tank shell hit the third floor of Al-Aqsa hospital in the central Gaza Strip on Monday, killing four people and wounding 16, the Health Ministry said. [ID:nL6N0PW35M}

"All patients were evacuated and the 100-bed hospital is no longer functioning," a WHO statement said on Tuesday after a WHO team visited the site.

Hospitals in northern Gaza have been overwhelmed by high numbers of trauma cases and their inadequate supplies, it said.

The International Committee of the Red Cross, guardian of the rules of war, condemned the attack on the Al-Aqsa hospital which it said had come under "direct fire at least four times".

Warring parties are obliged under international humanitarian law to protect medical personnel, ambulances and facilities, the ICRC said in a statement issued late on Monday.

(Reporting by Stephanie Nebehay; Editing by Angus MacSwan)

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