Olmert says Israel to decide soon on Gaza options

JERUSALEM (Reuters) - Prime Minister Ehud Olmert put Egyptian truce mediators and Hamas on notice on Sunday that Israel was fast approaching a decision on possible broader military action in the Gaza Strip to try to curb rocket attacks.

"Suffice to say that we are convinced this situation in the south cannot be allowed to continue," Olmert told his cabinet, referring to cross-border rocket strikes on southern Israel.

"We are approaching a crossroads on a decision on how things will be handled," he said.

Rockets launched from the Hamas-controlled Gaza Strip killed two Israelis this month, increasing public pressure on Olmert to take stronger action against militants in the territory, where Israel has mounted deadly air strikes and ground incursions.

Israeli Foreign Minister Tzipi Livni and Defence Minister Ehud Barak planned to meet Egyptian President Hosni Mubarak at an economic forum this week in Egypt's Red Sea resort of Sharm el-Sheikh and discuss the situation along the Gaza border.

Egypt has been trying to broker a truce between Israel and Hamas to avoid an escalation that could derail U.S.-backed peace negotiations between Olmert and Palestinian President Mahmoud Abbas.

Hamas has offered a six-month halt to hostilities in the Gaza Strip if Israel were to lift an embargo on the territory and reopen border crossings, an offer Egyptian intelligence chief Omar Suleiman presented to Israeli officials last week.

Leaders from Hamas in Gaza and in exile planned to hold talks with Suleiman in Cairo on Monday to hear Israel's response to the proposal.

Israel said last week a deal with Hamas must address the issue of a captive Israeli soldier. Hamas has said a truce agreement and the release of Gilad Shalit, held by Gaza militants since 2006, should remain separate issues.