* Israel moving toward ceasefire, cool to Hamas demands
* Gaza bombardment resumes after relative lull
* U.S., Israel agree to block Hamas arms shipments
By Nidal al-Mughrabi
GAZA, Jan 17 (Reuters) - Israeli leaders were preparing to order a ceasefire in the Gaza Strip, possibly as early as Saturday, political sources said, although it was unclear they would agree to conditions sought by Hamas.
Amid feverish diplomacy on Friday in Cairo and Washington, Israel said its offensive could be "in the final act", but again bombarded the Gaza Strip, where more than 1,150 Palestinians have been killed and 5,000 wounded in three weeks of fighting.
Israeli officials said Prime Minister Ehud Olmert would convene his security cabinet on Saturday night to decide whether to call a "unilateral" ceasefire, adding that Egypt believed that its mediation in talks with Hamas was not progressing.
Egyptian officials were not available for comment.
The term "unilateral" raised the possibility Israel might turn its back on Cairo’s efforts, a move that could spare Israel accepting Hamas demands that it ease a blockade on the enclave.
However, it may also simply reflect Israel’s reluctance to be seen to be negotiating with its Islamist foes — especially by Israeli voters, who will go to the polls on Feb. 10.
Diplomats have also described Egypt’s proposals as a series of phased measures, starting with a simple halt to fighting, followed by moves to meet other demands — Israel’s that Hamas be denied any opportunity to rearm and Hamas’s that Gazans be given access to goods and travel through Egypt and Israel.
Israel will not deal directly with the Islamist movement, which is also shunned by the West for its refusal to recognise the Jewish state, renounce violence and accept past peace deals.
Hamas’s exiled leader Khaled Meshaal said earlier Israel’s ceasefire terms were unacceptable and that Hamas, demanding an end to the punitive Israeli blockade of Gaza, would fight on.
Israeli Foreign Minister Tzipi Livni, asked if her country would end fighting "unilaterally", told Channel 10 television: "The security cabinet will convene to make the decision."
The inauguration of new U.S. President Barack Obama on Tuesday is seen by some as a deadline for Israel to bow to mounting international pressure and call off its attacks.
"Hopefully we’re in the final act," Olmert’s spokesman Mark Regev said of a conflict in which Israel has used devastating firepower to try to deter militants from shooting rockets at it from the Gaza Strip, home to 1.5 million people.
Gazans savoured some respite a day after fierce combat that some had seen as a final Israeli push before a ceasefire.
But Israeli strikes intensified later, killing 30 Gazans. Among them were fighters, including an Islamic Jihad commander in the southern town of Khan Younis, and civilians.
Israeli tank fire hit the home of a Hamas militant, killing his wife and five children, in the central Gaza Strip, medical officials said. The militant was not there at the time.
At least 15 rockets and mortar rounds landed in Israel from Gaza, the army said, wounding five civilians. Such attacks have dwindled during the war, which Israel launched on Dec. 27 with the declared aim of crippling Hamas’s rocket-firing capacity.
Ten Israeli soldiers and three civilians have been killed in the campaign.
Livni, vying to replace Olmert as prime minister, has privately advocated a unilateral halt to the Gaza war.
That would avoid any need for a binding, internationally recognised truce and confer no backdoor legitimacy on Hamas.
"I have said the end doesn’t have to be in agreement with Hamas but rather in arrangements against Hamas," Livni said.
She was speaking from Washington after signing a security pact with U.S. Secretary of State Condoleezza Rice aimed at cutting off Hamas weapons supplies from air, land or sea.
They agreed to share more information, know-how and various U.S. "assets" to block arms shipments bound for Gaza from Iran and elsewhere, apparently reinforcing existing arrangements.
Preventing Hamas from rearming is Israel’s main condition for any halt to its onslaught.
"Together the steps that we and other members of the international community can take will contribute to a durable ceasefire," Rice said, without saying when a truce might start.
Western officials said Olmert, Palestinian President Mahmoud Abbas and Egyptian President Hosni Mubarak might sign a separate pact in Cairo as early as Sunday, aimed at bolstering a truce with security arrangements for Gaza’s borders.
But Egyptian Foreign Minister Ahmed Aboul Gheit denied the report, Egypt’s state news agency said.
Hamas and diplomatic sources said on Thursday that Hamas had offered a one-year, renewable truce on condition that all Israeli forces withdrew within five to seven days and that all the border crossings with Israel and Egypt would be opened.
Hamas negotiators are due to meet the Egyptians on Saturday to discuss the Israeli response, delivered by senior Israeli official Amos Gilad, who held talks in Cairo on Friday.
Except for limited humanitarian supplies, the crossings have been all but closed under an Israeli-led blockade since Hamas seized control of Gaza in 2007 from Abbas’s forces. Hamas had won a Palestinian parliamentary election the previous year.
Medics taking advantage of a "humanitarian pause" in Gaza said they had recovered 23 bodies from Thursday’s battle zones.
Chanting crowds attended the funeral of a top Hamas leader, Saeed Seyyam, killed in an Israeli air strike along with nine other people. Seyyam was the interior minister in Gaza’s unrecognised government and leader of 13,000 armed security men.
About 45,000 Gazans fleeing the fighting have taken refuge in U.N.-run schools in the enclave, U.N. officials said.
Israeli forces have killed 1,157 people and wounded about 5,100 during the Gaza war, the Hamas-run Health Ministry said. (Additional reporting by Adam Entous, Joseph Nasr, Allyn Fisher-Ilan, Ori Lewis and Alastair Macdonald in Jerusalem; writing by Alistair Lyon; Editing by Giles Elgood)