Children have died of malnutrition in a Gaza hospital, the Hamas-ruled territory's health ministry said Wednesday as its overall toll for Palestinians killed in the almost five-month war neared 30,000.

As mediators insisted a truce deal between Israel and Hamas could be just days away, UN agencies sounded the alarm about the dire humanitarian conditions and warned of a looming famine in Gaza's north.

Two children died of "dehydration and malnutrition" at Gaza City's Al-Shifa hospital, health ministry spokesman Ashraf al-Qudra said, calling for "immediate action" from international institutions to prevent more such deaths.

"The famine death toll among children rose to six martyrs," at least five of them in the besieged territory's north in recent days, he said. AFP was unable to independently verify the deaths.

Mediators from Egypt, Qatar and the United States have been seeking a six-week pause in the war sparked by Hamas's October 7 attack on Israel, which in response vowed to eliminate the Palestinian Islamist group that rules in Gaza.

After a flurry of diplomacy, the mediators said a deal could finally be within reach, eyeing a truce before the beginning of Ramadan, the Muslim fasting month which starts on March 10 or 11, depending on the lunar calendar.

The proposals reportedly include the release of some Israeli hostages held in Gaza in exchange for several hundred Palestinian detainees held by Israel.

Short of the complete withdrawal Hamas has called for, a source from the group said the deal might see Israeli forces leave "cities and populated areas", allowing the return of some displaced Palestinians and humanitarian relief.

The Israeli military campaign in Gaza has killed at least 29,954 people, mostly women and children, according to the health ministry, which does not specify how may fighters have been killed.

It was launched in response to Hamas's October 7 attack on southern Israel which resulted in the deaths of around 1,160 people, mostly civilians, according to an AFP tally of official Israeli figures.

- Famine 'imminent' -

In a sign of growing desperation among Gazans over living conditions, a rare protest was held Wednesday in the far-southern city of Rafah, packed with nearly 1.5 million Palestinians -- many of them displaced by the fighting.

"The situation is very difficult in Gaza. We can't afford things," said Rafah resident Abdulrahman Abu Khuder at the rally over soaring prices of basic commodities.

Khamis Shallah, displaced from Gaza City, said one kilo of sugar now costs "between 80 and 100 shekel ($22-28), and the price of yeast in 100 shekel".

The Hamas government should "interfere" to ensure ordinary Palestinians have basic supplies, he said, but "they don't care".

While hundreds of thousands of Gazans have fled south since the start of the war, those who remain in the territory's north have faced an increasingly desperate situation, aid groups have warned.

"If nothing changes, a famine is imminent in northern Gaza," the World Food Programme's deputy executive director Carl Skau told the UN Security Council Tuesday.

The WFP said no humanitarian group had been able to deliver aid to the north for more than a month, accusing Israel of blocking access.

Most aid trucks have been halted, but foreign militaries have air dropped supplies over southern Gaza.

What aid does enter Gaza passes through the Rafah, where Israel has warned it plans to launch a ground offensive, potentially only after a truce.

Israel has insisted it would move civilians to safety before sending troops into the area on Gaza's border with Egypt, which has warned an assault on Rafah would have "catastrophic repercussions".

- 'No one should be left behind' -

While Israel's plans for post-war Gaza exclude any mention of the Palestinian Authority, its top ally the United States and other powers have called for a revitalised PA to take charge of the territory as well as occupied the West Bank.

Palestinian foreign minister Riyad al-Maliki said a "technocratic" Palestinian government without Gaza's rulers Hamas was needed to "stop this insane war" and facilitate relief operations and reconstruction.

His government, based in the West Bank, resigned this week, with prime minister Mohammad Shtayyeh citing the need for change after the war ends.

A government that includes Hamas -- longtime rivals of president Mahmud Abbas's Fatah party, which controls the PA -- would "be boycotted by a number of countries," Maliki told a news conference in Geneva.

"Hamas should understand this, and I do believe that they are in support of the idea to establish, today, a technocratic government" for a period of "transition", he said.

In Israel, Netanyahu has come under increasing pressure to bring the hostages home.

Gaza militants on October 7 took about 250 captives, 130 of whom remain in Gaza, including 31 presumed dead, according to Israel.

Israeli Defence Minister Yoav Gallant said "military pressure will bring back additional hostages", insisting the government was "making every effort" to free all of them.

A group of 150 Israelis started a four-day march from Reim, near the Gaza border, to Jerusalem, calling for the government to reach a deal.

"The war cabinet is responsible for ensuring that... all the hostages will be included" in the deal currently being negotiated, said Ronen Neutra, father of captive Omer Neutra, an Israeli soldier who is also a US citizen.

"No one should be left behind," he said.

NZ designates Hamas a 'terrorist entity'

New Zealand on Thursday became one of the last Western countries to designate all of Hamas as a "terrorist entity", saying the attacks of October 7 had shattered the notion its political and military wings could be separated.

"The organisation as a whole bears responsibility for these horrific terrorist attacks," the government said, announcing a move that spells a freeze on Hamas assets in New Zealand and a ban on providing it with "material support".

"The terrorist attacks by Hamas in October 2023 were brutal and we have unequivocally condemned them," New Zealand Prime Minister Christopher Luxon said in a statement.

Luxon stressed the designation was about Hamas "and is not a reflection on the Palestinian people in Gaza and around the world" while indicating humanitarian support would continue.

"The designation does not stop New Zealand providing humanitarian and future development assistance to benefit civilians in Gaza."

New Zealand had designated the Qassam Brigades, the military wing of Hamas as a terrorist entity since 2010.

But it has been reluctant to follow other Western nations in designating the entire group -- which is also a political party and has enjoyed widespread Palestinian support.

Hamas won elections in Gaza in 2006 and has ruled without fresh polls ever since.

Some New Zealand political figures have argued that Hamas' "terrorist" designation should be matched by a similar designation of the Israel Defense Forces over its months-long Gaza bombing campaign that has killed almost 30,000 people, according to Hamas-controlled authorities in the territory.

Such a move is highly unlikely, but New Zealand on Thursday also announced sanctions on about a dozen "extremist Israeli settlers" accused of violence against Palestinians.

"We are imposing travel bans on a number of people known to have committed violent acts. These individuals will not be able to travel to New Zealand," said Foreign Minister Winston Peters.

The individuals were not named publicly.