Israel was still hunting for up to four gunmen who on Monday infiltrated the Egyptian border and staged a deadly ambush, killing one Israeli and sparking a firefight which left two militants dead.

The incident began around 6:00 am (0300 GMT) when a group of up to six gunmen opened fire towards a convoy of vehicles carrying Israeli construction workers to a site where they are building part of the vast border fence, the army said.

The two rockets, apparently fired from Sinai, which landed near towns in the deep south of Israel were linked to the Egyptian presidential election, a senior Israeli security source told AFP on Sunday.

"The rockets fired at Israel over the weekend were a one-off and carried out by those who wanted to influence the Egyptian presidential election," he said referring to militant groups in the Sinai.

A damning report that slammed Israeli Prime Minister Benjamin Netanyahu's handling of the 2010 flotilla raid has raised fears over how a strike on Iran would be managed, press reports said on Thursday.

The 153-page report by State Comptroller Micha Lindenstrauss dominated the headlines.

Israel's state watchdog on Wednesday sharply criticized Israeli Prime Minister Benjamin Netanyahu over his handling of a 2010 military raid on a Gaza-bound flotilla which left nine Turkish nationals dead.

"In the process of decision making, which was led by the prime minister and under his responsibility, regarding the handling of the (flotilla), there were significant shortcomings," said a report published by State Comptroller Micha Lindenstrauss.

Israel Prisons Service said on Monday that a Palestinian prisoner who has been on hunger strike for more than 80 days, had ended his protest, but Palestinian sources, including his lawyer, denied the claim.

"(Mahmoud) Sarsak ended his hunger strike," IPS spokeswoman Sivan Weizman told Agence France Presse, saying he had taken the decision to end his fast after consulting his lawyer and the prison administration.

The Israeli military carried out air strikes on Gaza overnight, injuring one Palestinian, after a rocket was fired at southern Israel, the army and Palestinian medical sources said on Monday.

"Overnight, IAF (Israel Air Force) aircraft targeted a weapons manufacturing facility and a terror tunnel in the northern Gaza Strip. Direct hits were identified," it said.

The long-overdue process of updating electoral lists in Gaza is expected to take six weeks, the head of the Palestinian Central Election Commission said on Tuesday.

The announcement was made a day after Hamas gave the CEC the green light to begin updating the lists for the first time in six years in a key step to paving the way for elections.

Two Palestinian prisoners in Israeli jails are refusing food, despite the signing this week of a deal to end a mass prisoner hunger strike, Israeli and Palestinian officials said on Thursday.

An official from the Palestinian Prisoners' Club, which tracks the well-being of the 4,700 Palestinians in Israeli jails, told Agence France Presse that "prisoners Mahmud Sarsak and Akram Rikhawi are still on hunger strike."

An Israeli tank shell fired into the Gaza Strip on Thursday wounded seven Palestinians, leaving two of them in critical condition, Palestinian medical officials told AFP.

The shell hit near the Karni crossing east of Gaza City, according to the medics.

Palestinians and Arab-Israelis prepared on Tuesday to mark Nakba day, commemorating the exodus of hundreds of thousands of their kin after the establishment of Israel state in 1948.

Protests were scheduled to take place across the Palestinian territories, and an Agencce France Presse correspondent said clashes broke out early on Tuesday between police and stone-throwing demonstrators in the east Jerusalem neighborhood of Issawiya.