(AFP) - Palestinian militant group Hamas launched a large-scale surprise attack against Israel on Saturday, firing thousands of rockets from Gaza and sending fighters to kill or abduct people as Israel retaliated with devastating air strikes.

At least 70 people were reported killed in Israel, while Gaza authorities released a death toll of 198 in the conflict's bloodiest escalation in years which also left hundreds more wounded on both sides.

"We are at war," said Israeli Prime Minister Benjamin Netanyahu as the military launched a series of strikes against targets in the blockaded coastal enclave, including several residential tower blocks that were completely destroyed.

"The enemy will pay an unprecedented price," the veteran Israeli premier vowed after Hamas launched its first such combined air, sea and ground offensive, half a century after the outbreak of the 1973 Arab-Israeli war.

Hamas has released images of several Israelis taken captive, and Israel army spokesman Daniel Hagari confirmed that "there are kidnapped soldiers and civilians. I can't give figures about them at the moment. It's a war crime committed by Hamas and they will pay the price."

The Islamist group started the attack around 6:30 am (0330 GMT) with thousands of rockets aimed as far as Tel Aviv and Jerusalem, some bypassing the Iron Dome defence system and hitting buildings.

Hamas fighters -- travelling in vehicles, boats and even using motorised paragliders -- breached Gaza's security barrier and attacked nearby Israeli towns and military posts, opening fire on residents and passersby.

Bodies were seen lying on the streets of the town of Sderot near Gaza.

"Send help, please!" one Israeli woman sheltering with her two-year-old child pleaded as militants outside opened fire at her house and tried to break into their safe room, Israeli media reported.

AFP journalists witnessed armed Palestinians gathered around a burning Israeli tank and others driving a seized Israeli Humvee military vehicle back into Gaza.

- 'Gates of hell' -

Israeli army Major General Ghasan Alyan warned Hamas had "opened the gates of hell".

The army said its forces were engaged in live gun battles in several locations near the Gaza Strip, in an operation labelled "Swords of Iron".

An AFP journalist in Gaza saw smoke billowing from the remains of a residential tower following Israeli strikes, which Gaza's interior ministry said contained 100 apartments and was completely destroyed.

Israel's military said it had warned residents to evacuate before targeting two multistorey buildings used by Hamas.

The aid group Doctors without Borders said one strike had hit the enclave's Indonesian hospital and an ambulance outside Nasser Hospital in southern Gaza, causing multiple deaths.

The escalation follows months of rising violence, mostly in the occupied West Bank, and tensions around Gaza's border and at contested holy sites in Jerusalem.

Hamas labelled its attack "Operation Al-Aqsa Flood" and called on "resistance fighters in the West Bank" as well as in "Arab and Islamic nations" to join the battle.

"We decided to put an end to all the crimes of the occupation (Israel)," said its armed wing, the Ezzedine al-Qassam Brigades, claiming to have fired more than 5,000 rockets.

Army spokesman Richard Hecht said Israel had counted at least 2,200 rockets aimed at its territory.

Hamas chief Ismail Haniyeh claimed the group was on the "verge of a great victory and a clear conquest on the Gaza front".

"Enough is enough," he said in a televised address. "The cycle of intifadas (uprisings) and revolutions in the battle to liberate our land and our prisoners languishing in occupation prisons must be completed."

- Bodies in the streets -

Air raid sirens wailed across southern and central Israel, as well as in Jerusalem, where multiple incoming rockets were intercepted by air defence systems.

In Tel Aviv, an AFP photographer saw a gaping hole in a building, with residents boarding a bus to seek safety in a hotel.

Rocket impacts left cars burning beneath residential buildings in the Israeli city of Ashkelon, north of Gaza.

Among the dead was the president of a regional council for Israeli communities northeast of Gaza, who the council said was killed in a gun battle with attackers.

Schools will remain closed on Sunday, the start of the week in Israel.

The conflict sparked major disruption at Tel Aviv airport, with American Airlines, Emirates and Ryanair among carriers with cancelled flights.

- 'Dangerous precipice' -

Hamas took control of Gaza in 2007, leading to Israel's crippling blockade of the impoverished enclave of 2.3 million people.

Israel and Hamas have since fought several wars. The last major military exchange, in May, killed 34 Palestinians and one Israeli.

In northern Gaza on Saturday, hundreds of people fled their homes, carrying food and blankets, an AFP correspondent said.

At Gaza City's Al-Shifa hospital an AFP journalist saw eight bodies in the morgue, while another reporter witnessed the funeral of a ninth person killed in Khan Yunis in southern Gaza.

In the West Bank, two Palestinians were killed, in Ramallah and Jericho, and around 50 wounded in clashes with Israeli forces and settlers, the Palestinian health ministry and Red Crescent Society said.

In Israeli-annexed east Jerusalem, some Palestinian residents cheered and blew their car horns as sirens blared.

Western capitals condemned the attacks by Hamas, which the European Union, United States and Israel consider a terrorist group.

UN Security Council chair Brazil said it would call an emergency meeting.

But Hamas drew support from other foes of Israel, with Iran's supreme leader declaring he was "proud" of the Hamas action.

Lebanese militant group Hezbollah, which fought a war against Israel in 2006, hailed the "heroic operation".

US President Joe Biden was briefed on the "appalling Hamas terrorist attacks," said the White House, stressing that Washington would ensure Israel has the means to defend itself.

European Commission President Ursula von der Leyen called the attack "terrorism in its most despicable form".

UN Middle East peace envoy Tor Wennesland said the assault had led to "a dangerous precipice" and called for all sides to "pull back from the brink".

Before Saturday's violence, at least 247 Palestinians, 32 Israelis and two foreigners had been killed this year, including combatants and civilians on both sides, according to Israeli and Palestinian officials.

© Agence France-Presse