Israel's block on deliveries into the war-stricken Gaza Strip has led to price increases and fears of food shortages, prompting punitive measures from the Hamas-run authorities against merchants, according to Hamas sources and witnesses.

Israel's Prime Minister Benjamin Netanyahu threatened Hamas on Monday with unimaginable consequences if it did not return hostages held in Gaza, while the Palestinian group accused his government of sabotaging the truce.

Israel wants to extend the first phase of the deal with Hamas, rather than begin negotiations over the more politically fraught second stage.