JERUSALEM (AP) — 21 soldiers were killed in the Gaza Strip in the deadliest attack on Israeli forces since the Oct. 7 Hamas attack that sparked the war, the military said Tuesday.

Hours later, the military announced that ground troops had encircled the southern town of Khan Younis, Gaza’s second-largest city, where heavy fighting has killed and wounded dozens of Palestinians in recent days.

Prime Minister Benjamin Netanyahu mourned the soldiers but vowed to continue the offensive until “absolute victory” over Hamas. He has also promised to return over 100 hostages held in Gaza. But Israelis are increasingly divided over whether both are possible, and the large number of Israeli casualties has put pressure on the Israeli government to end previous military operations.

A senior Egyptian official, meanwhile, said Israel had proposed a two-month ceasefire in which the hostages would be released in exchange for the release of Palestinians detained by Israel and senior Hamas leaders in Gaza would be allowed to relocate to other countries.

The official, who was not authorized to brief the media and spoke on condition of anonymity, said Hamas rejected the proposal and insisted no more hostages would be released until Israel ends its offensive and withdraws from Gaza . The Israeli government declined to comment on the talks.

The official said Egypt and Qatar, which have negotiated deals between Israel and Hamas in the past, were developing a multi-stage proposal to close the gaps. Families of the hostages called on Israel to reach an agreement with Hamas, saying time was running out to bring the hostages home alive.

On Monday, Israeli reservists were preparing explosives to demolish two buildings in central Gaza when a militant fired a rocket-propelled grenade at a tank nearby. The explosion set off the explosives, causing both two-story buildings to collapse on the soldiers inside.

The military says at least 217 soldiers have been killed since the ground offensive began in late October, including three in a separate incident on Monday.

Netanyahu acknowledged it was “one of the hardest days” since the war began and said the military would launch an investigation. “In the name of our heroes and for our own lives, we will not stop fighting until absolute victory,” he wrote on X, formerly known as Twitter.

Israel launched its offensive after Hamas crossed the border on October 7, killing over 1,200 people and kidnapping about 250 others. More than 100 were released in November in exchange for a week-long ceasefire and the release of 240 Palestinians detained by Israel.

The offensive has caused widespread destruction, displacing an estimated 85% of Gaza’s population and leaving over 25,000 Palestinians dead, according to health authorities in the Hamas-controlled territory. The United Nations and international aid groups say the fighting has caused a humanitarian disaster and a quarter of Gaza’s 2.3 million people are at risk of starvation.

The war has heightened regional tensions as Iranian-backed groups in Lebanon, Syria, Iraq and Yemen attack targets in the United States and Israel in support of the Palestinians. The US and Britain launched another wave of attacks on Monday against Yemen’s Houthi rebels, who have targeted international shipping in the Red Sea in what they portray as a blockade of Israel.

DEADLY FIGHTS IN THE CENTER AND SOUTH

Hamas is believed to have suffered heavy casualties but continued to put up fierce resistance in the face of one of the deadliest air and ground offensives in recent history. Militants are still fighting Israeli forces throughout the area and firing rockets into Israel.

The attack that killed the soldiers occurred about 600 meters (yards) from the border in Maghazi, one of three refugee camps established in central Gaza dating back to the war over the creation of Israel in 1948.

Ground operations focused on the camps as well as Khan Younis after Israel claimed to have largely defeated Hamas in the northern Gaza Strip through operations that caused widespread destruction in that part of the territory, including Gaza City.

The military said its forces had killed dozens of militants in Khan Younis in recent days and managed to encircle the city. No evidence was presented and it was not possible to independently confirm details of the fighting there.

Israel believes Hamas commanders may be hiding in vast tunnel complexes beneath Khan Younis, the hometown of the group’s supreme leader in Gaza, Yehya Sinwar, whose whereabouts are unknown. Hamas leaders are also believed to be using hostages as human shields, further complicating any rescue efforts.

Internet and telephone networks in the Gaza Strip collapsed again on Monday for the 10th time during the war, posing another challenge for first responders and making it impossible for people to reach loved ones in different parts of the territory.

Pressure for a ceasefire

The growing death toll and dire humanitarian situation have led to increasing international pressure on Israel to scale back the offensive and agree to a path to creating a post-war Palestinian state. The United States, which provided critical military assistance to the offensive, has joined these demands.

But Netanyahu, whose popularity has plummeted since October 7 and whose ruling coalition is beholden to far-right parties, has rejected both demands.

Instead, he said Israel must expand its operations and eventually take over the Gaza side of the border with Egypt, where hundreds of thousands of Palestinians who have fled other areas are crammed into overcrowded U.N. shelters and sprawling tent camps.

This sparked an angry protest from the Egyptian government, which rejected Israeli allegations that Hamas was smuggling weapons across the heavily guarded border.

Diaa Rashwan, head of Egypt’s state information service, said on Monday that any Israeli attempt to occupy the border area would “lead to a serious threat” to relations between the two countries, which signed a landmark peace treaty over four decades ago. Egypt is also deeply concerned about a possible influx of Palestinian refugees into the Sinai Peninsula.

Rashwan said Egypt is in full control of the border after taking a series of measures in recent years, including creating a 5-kilometer buffer zone and building barriers above and below ground.

Egypt “is capable of defending its interests and sovereignty over its land and borders and will not pawn it in the hands of a group of extremist Israeli leaders who seek to plunge the region into a state of conflict and instability.” said Rashwan.

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Jobain reported from Rafah in the Gaza Strip. Associated Press writers Samy Magdy in Cairo and Melanie Lidman in Jerusalem contributed to this report.