Residents: Troops now in suburbs

? Israeli troops advanced into Gaza suburbs for the first time early today, residents said, hours after Prime Minister Ehud Olmert warned Islamic militants of an “iron fist” unless they agree to Israel’s terms to end the fighting.

Hamas showed no signs of wavering, however, with its leader, Ismail Haniyeh, saying the militants were “closer to victory.”

Despite the tough words, Egypt said it was making slow but sure progress in brokering a truce, and special Mideast envoy Tony Blair said elements were in place for a cease-fire.

Sounds of the battle could be heard clearly before dawn today around the city of 400,0000 as the Israeli forces, backed by artillery and attack helicopters, moved into neighborhoods east and south of Gaza City. Israeli gunboats shelled the coast from the west.

The Palestinian residents told The Associated Press that Israeli tanks rolled into public areas of the Tel Hawwa neighborhood, pushing back militants. Tens of thousands of Palestinians live in apartment buildings in the neighborhood south of Gaza City.

One of the residents, Khader Mussa, 35, told The Associated Press by telephone that he saw two apartment buildings on fire. He said he was huddling in the basement of his building with 25 other people, including his pregnant wife and his parents. “The gates of hell have opened,” he said. “God help us.”

Several other buildings were on fire, witnesses said, including a lumberyard. Thick smoke blanketed the area.

The Israeli military confirmed that a battle was in progress but gave no details.

On Monday, as diplomats struggled for traction in truce efforts, Olmert stood within Hamas rocket range and said Israel would only end military operations if Hamas stops rocketing Israel, as it has done for years, and is unable to rearm after combat subsides.

“Anything else will be met with the Israeli people’s iron fist,” Olmert said.

As he spoke in Ashkelon, Israeli forces hammered suspected hiding places of Hamas operatives who control the poor, densely populated territory just across the border. The Israeli military said Hamas fired about 20 rockets at Israel on Monday, fewer than previous days.