GAZA CITY, Gaza Strip (AP) -- Israeli artillery shells tore through the walls of a U.N. school crowded with sleeping war refugees and back-to-back explosions rocked a market filled with shoppers Wednesday as Israel's stepped up campaign against Gaza's Hamas rulers claimed at least 116 Palestinian lives.
After the strikes near the shopping area in Gaza City, bodies lay scattered in the streets as the wounded screamed for help. "Where is the ambulance?" one man moaned as he lay on the blood-soaked ground.
Some 3,300 Gazans seeking refuge from the fighting had been crammed into the U.N. school at the Jebaliya refugee camp when a series of Israeli artillery shells hit before daybreak, turning a classroom where families had been sleeping into a tragic scene of bloodied clothing, bedding and debris.
Assad Sabah said he and his five children were huddled under desks because of the constant sound of tank fire throughout the night when suddenly mayhem struck.
"We were scared to death," he said. "After 4:30 a.m., tanks started firing more. Three explosions shook the school. One classroom collapsed over the head of the people who were inside."
Palestinian health officials said at least 17 people were killed and 90 wounded in the school attack -- the latest in a series of strikes the United Nations says has hit U.N. facilities that are supposed to be safe zones in the 23-day-old war.
"Where will we go next?" wailed 56-year-old Aishe Abu Darabeh, sitting dazed outside a classroom after the shelling. "We fled and they are following us."
Israel's military said no U.N. facility had been intentionally targeted during Wednesday's operation, but troops had responded to Hamas mortar fire directed at Israeli soldiers near the school.
However, the chief of the U.N. aid agency for Palestinian refugees expressed "anger and indignation" at Israeli forces firing toward a U.N. facility even after being told 17 times, including just hours before the shelling attack, that it was filled with civilians.
"Enough is enough," Pierre Kraehenbuehl told The Associated Press, noting that six U.N. schools have been hit since the fighting began.
Secretary-General Ban Ki-moon called the school shelling "outrageous" and "unjustifiable," and demanded an immediate humanitarian cease-fire.
"Nothing is more shameful than attacking sleeping children," the U.N. chief said.
At least 116 Palestinians were killed Wednesday, including 16 in the shopping area, while the overall Palestinian death toll since July 8 climbed to 1,361, said Palestinian health official Ashraf al-Kidra.
The Israeli military said three of its soldiers were killed when a booby-trapped house collapsed after they identified an entrance to a Hamas tunnel inside. In all, 56 soldiers have been killed, as well as two Israeli civilians and a Thai citizen.
Wednesday marked a second day of particularly heavy Israeli air and artillery attacks, at a time when Egyptian cease-fire efforts appeared to be stalling. Israeli media said late Wednesday that Israel's Security Cabinet decided to press forward with the operation.
Egyptian officials, meanwhile, met with an Israeli envoy about Israel's conditions for a cease-fire, including disarming Hamas, according to a high-ranking Egyptian security official, who spoke on condition of anonymity because he was not allowed to discuss the delicate diplomatic efforts.
Hamas has said it will only halt fire once it receives guarantees that the Gaza border blockade by Israel and Egypt will be lifted. Rejecting calls for an unconditional cease-fire, Hamas has fired dozens of rockets at Israel each day.
Israel, in turn, has said its forces will stay in Gaza at least until they complete the demolition of more than 30 Hamas military tunnels used for launching attacks on Israel. Brig. Gen. Mickey Adelstein, commander of the Gaza Regional Division, said two-thirds had been destroyed and that it will take "a few more days" to destroy the rest.
Israel says it wants to decimate Hamas' rocket-launching capability, diminish its weapons arsenal and demolish the tunnels. It has launched more than 4,000 strikes against Hamas-linked targets, including rocket launchers and mosques where it says weapons were stored.
Israeli strikes have also hit dozens of homes. Mahmoud Abu Rahma of the Palestinian human rights group Al Mezan said nearly half of the Palestinians killed so far died in their homes.
Israeli officials have accused Hamas of using Gaza's civilians as human shields by firing rockets from crowded neighborhoods and putting them at risk in the event of an Israeli counterstrike.
However, Kraehenbuehl, the U.N. official, said Israel must try harder to ensure that civilians are not hurt, especially in Gaza where 1.7 million people are squeezed into a small coastal territory. His agency has opened 80 of its schools to more than 200,000 Gazans fleeing the violence.