The new fighting erupted Friday -- the day a six-month truce between Hamas and Israel expired and the Islamist group declared it would not renew.
Since then, Hamas has allowed Islamic Jihad militants to bombard Israelis in the towns near the Gaza Strip, including Sderot. The barrages slowed down only on Monday, when Hamas announced that Palestinian factions in the strip were observing a 24-hour lull requested by Egyptian mediators.
Israeli officials are calling for sharp retaliation. The Israeli Cabinet already has voted to hit back, leaving the timing and scope of the nation's response to Defense Minister Ehud Barak.
The rocket attacks are a reminder of the Israeli government's inability to resolve the Gaza problem. Coming in the midst of an election campaign, the deterioration of the situation around Gaza has prompted many Israelis to ask why the government has not yet struck back in a serious way.
Cabinet ministers and leading members of the coalition have jumped into the fray, questioning Barak's apparent restraint.
Barak, however, refuses to be hurried. He dismisses calls for immediate action as political grandstanding, saying that for the sake of its standing in the region, Israel must retaliate the right way. Barak insists he does not want to repeat the mistakes of the 2006 Israel-Hezbollah war.
Complicating matters, Hamas' rockets have increased their range from six months ago, before the cease-fire.
Yuval Diskin, chief of the Shin Bet security agency, told the Cabinet on Sunday that Hamas now could target Israeli population centers within a radius of 25 miles from the Gaza Strip. That includes Beersheba, Ashdod, Kiryat Gat and a host of smaller cities and towns.
As the Israeli daily Yediot Achronot put it in a screaming headline, "One of every eight Israelis is in range of the rockets."
Hamas used the truce to smuggle in tons of new weaponry, including upgraded Katyusha rocket launchers with a 25-mile range. Israeli military planners estimate that in the event of a showdown in Gaza, Hamas would be able to fire hundreds of rockets a day at Israeli civilian centers -- much the same way Hezbollah did in 2006.
Hamas also has built Hezbollah-style fortifications and brought anti-tank weapons into the strip.
"For Israel, invading Gaza will not be a walk in the park," warned Moussa Abu Marzuk, deputy head of Hamas' Damascus-based leadership.
Israel has several military options in Gaza, all of them problematic. The Jewish state could strike at rocket-launching crews and military installations from the air, but that alone would not be enough to stop the rocket fire.
Israel's army could target Hamas leaders, but most them already have gone underground. The army also could fire artillery shells at the sources of rocket fire, but since the Palestinian militiamen operate mainly from built-up civilian areas, this likely would cause many civilian casualties and invite international condemnation.
Israel could undertake limited ground operations against rocket launchers and capture the territory from where the rockets are being fired, but this would put Israeli troops at risk in the heart of Palestinian territory.
A large-scale ground operation likely would be more effective, but it would require an exit strategy Israel does not have -- or leave Israel responsible for Gaza and the needs of its estimated 1.5 million Palestinians.
For its part, Hamas has much to lose from an all-out war. Its goal in the current crisis is to get Israel to ease its siege on Gaza and lessen the pressure on Hamas militants in the West Bank. But if Israel invades and overruns Gaza, it could lose everything -- including its hold on power in Gaza.
On Monday, Hamas showed signs of stepping back from the brink. It ordered a 24-hour suspension of rocket fire to give Egyptian mediators another chance to negotiate a new cease-fire on terms more favorable to Hamas.
Israel, however, shows no sign of backing down.
The standoff with Hamas goes far beyond Gaza, and the outcome will reverberate across the region. It is part of the regional power struggle between Iran and its proxies and between fundamentalists and the moderate pro-Western camp, including countries such as Egypt, Saudi Arabia and Jordan.
While Arab moderates in public have expressed alarm at the escalation, in private some reportedly have hinted to Israel that they would not be sorry to see Hamas and its leaders hit hard. The Egyptians even have hinted publicly that Iran has been fanning the flames from behind the scenes.
Indeed, the Gaza standoff is part of the showdown between Israel and Iran. A powerful Israeli response will send a strong message to Tehran and its Hezbollah proxy in Lebanon. A failed action or a perceived retreat could encourage the Iran to step up its challenges of Israel.
Barak is keenly aware of what's at stake and is insisting on detailed planning and thinking through all the strategic implications. This way, if Israel does launch a major operation, it will achieve an overwhelming victory and have a clear strategy for the political aftermath.
But there is still no agreement among Israel's three major prime ministerial candidates on what to do about Hamas in the long term. Kadima leader Tzipi Livni and the Likud's Benjamin Netanyahu say the Hamas government should be toppled. Barak advocates the more modest goal of restoring quiet after dealing a heavy blow to the organization's military wing.
The way the goal is defined will determine the nature of the military operation and set the tone for the political aftermath.