Washington denied a report that the White House was tightening the reins on the routine delivery of military aid to Israel over concerns about the extent of its military action in Gaza.

But the US State Department acknowledged that arms shipments were being kept under review in the face of the conflict, which has killed 1,962 Palestinians and 67 Israelis since July 8.

Egyptian mediators won a new five-day cease-fire late on Wednesday to give Israeli and Palestinian negotiators more time to thrash out a longer-term truce.

The cease-fire got off to a rocky start in its first few hours, but Israeli officials said it had held into a second day on Friday.

The military said there was no Palestinian rocket fire over-night, and that it had carried out no air strikes.

"There was nothing,"a spokeswoman said.

Lifting of blockade

But the negotiations in Cairo for a longer-term settlement were not expected to resume before Saturday evening as negotiators from both sides held consulted with their political leaders about the parameters for an eventual compromise.

Hamas, Gaza's Islamist de facto rulers, who have representation on the Palestinian negotiating team, are insisting that there can no return to peace without a lifting of Israel's eight-year blockade of the beleaguered coastal enclave.

But Israel's right-wing government - under pressure from constituents from Gaza border towns that have endured persistent rocket fire from the territory - is refusing to countenance any major reconstruction effort without full demilitarization.

Thousands of Israelis joined by the mayor of the border town of Sderot, Alon Davidia member of Prime Minister Benjamin Netanyahu's Likud party - rallied in Tel Aviv late on Thursday against any outcome that does not provide them with lasting security.

"This is a universal principle. We want to live in peace,"Davidi told the crowd.

The army says Palestinian militants in Gaza have launched more than 3,500 rockets since July 8.More than 2,790 have slammed into Israel and around 600 have been shot down.

Netanyahu was to convene his security Cabinet for a second day on Friday to hammer out a negotiating position for the resumed truce talks.

Top-selling Israeli newspaper Yediot Aharonot quoted one minister as saying he and colleagues had been kept in the dark about progress in the Cairo talks and only learned of Wednesday night's cease-fire extension from watching a televised news conference by the Palestinians.

"It was simply unreal,"the unidentified minister was quoted as saying.