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At least 16 people were killed when a United Nation shelter in northern Gaza was hit during Thursday's fighting. The strike wounded more than 200, most of them women and children.
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Condemning the incident, the Palestinian government called it "Israeli brutal aggression that targeted" Gaza's displaced. It demanded an end to the "Israeli war machine."
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The Israeli military had warned on Monday that the shelter should be evacuated. By Thursday, the UN had decided to withdraw its staff and to stop providing food, reports The New York Times.
Chris Gunness, spokesman for the main UN agency in Gaza UNRWA, confirmed the strike and criticised Israel.
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Ban Ki-moon, secretary general of the UN, condemned the attack, which came hours after the agency had warned that Israel's actions could constitute war crimes.
"Today's attack underscores the imperative for the killing to stop and to stop now," he said.
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The Israeli military first claimed, in a text sent to journalists, that the school could have been hit by Hamas missiles that fell short.
Later, a series of tweets from the Israel Defence Forces appeared to confirm the deaths were the result of an Israeli strike.
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The Israeli military, which said it was "reviewing the incident", claimed the incident had occurred during "heavy combat" in the area and accused "terrorists" of "using civilian infrastructure and international symbols as human shields", according to The Guardian.
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The strike came on the 17th day of an increasingly bloody conflict between Israel and Palestinian militants that has killed nearly 800 people in Gaza. Thirty two Israeli soldiers and three civilians have been killed.