With Israeli tanks and infantry massing along the Gaza Strip's northern border, Prime Minister Ehud Olmert said the campaign launched last week to free Corporal Gilad Shalit could turn into "a long war."

Increasing political pressure on Olmert to launch a broad ground offensive, Palestinian militants carried out their deepest rocket strike yet against Israel, hitting a school yard in the coastal city of Ashkelon, some 10 km (6 miles) from Gaza, causing no injuries.

Olmert said in broadcast remarks the attack would have "unprecedented, far-reaching consequences" and Hamas, whose military wing claimed responsibility for launching the rocket, "would be the first to feel them."

Israel ignored a 6 a.m. (0300 GMT) ultimatum set by three militant factions, among them the Hamas armed wing, to begin freeing 1,000 Palestinian prisoners, as well as jailed women and youths, in exchange for Shalit.

The factions vowed not to release any information about the soldier and pulled out of negotiations with Egyptian mediators trying to end the standoff, a Hamas political leader said.

But Palestinian Prime Minister Ismail Haniyeh of Hamas called on the factions to return to the negotiating table, putting himself at odds with militants who said further discussions over Shalit's fate were out of the question.

Haniyeh, whom Israel has hinted could be targeted for assassination, also urged militants to keep Shalit alive.

The factions had warned Israel that it will "bear full responsibility for future consequences" if their prisoner swap demands were not met.

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