Some members of Israel’s coalition have ruled out a proposed hostage deal with Hamas, but the prime minister has yet to state his position.

In the statement, the Israeli PM also mentioned that the Netanyahu government and IDF are working on their plans regarding Gaza City.

Relations between the two countries have frayed since Australia said it planned to recognise a Palestinian state.

Netanyahu's comment followed Israel's revocation of the visas of Australian diplomats to the Palestinian Authority on Monday, after a decision by Canberra to recognise a Palestinian state and cancel the visa of an Israeli lawmaker.

A measure of how the country's mood has changed is the discontent evident among some reservists being called up to serve once again.

Many Israelis feel that freeing the hostages cannot happen if the government refuses to come to terms with Hamas and pursues its policy of trying to eliminate the group militarily.

Israelis took to the streets on Sunday to protest Prime Minister Benjamin Netanyahu’s plan to conquer the rest of the Gaza Strip rather than attempt to negotiate an end to the war under which Hamas would free its last hostages.