By Nidal al-Mughrabi and Maayan Lubell

JERUSALEM/GAZA (Reuters) -Palestinian Islamist group Hamas launched the biggest attack on Israel in years on Saturday, killing more than 20 people and wounding hundreds in a surprise assault that combined gunmen crossing into Israel with a barrage of rockets fired from Gaza.

Israel said the Iran-backed group had declared war as its army confirmed fighting with militants in several Israeli towns and military bases near Gaza and Prime Minister Benjamin Netanyahu vowed to retaliate.

“Our enemy will pay a price the type of which it has never known,” he said. “We are in a war and we will win it.”

At least 22 Israelis were killed in the attack so far, Israel’s ambulance service said. Around 545 Israelis had been wounded, the health ministry said.

The Israeli military said it had responded with air strikes into Gaza, where witnesses reported hearing heavy explosions and multiple dead being carried into hospitals.

The attack marked an unprecedented infiltration into Israel by an unknown number of Hamas gunmen crossing from the Gaza Strip, and the heaviest blow for Israel in the conflict with Palestinians since the suicide bombings of the Second Intifada some two decades ago.

The militant Islamic Jihad group said it had joined the attacks and was holding several Israeli soldiers captive and Hamas social media accounts showed footage of what were said to be Israeli captives being taken alive into Gaza.

The Israeli military has declined to comment on the reports but has not denied them either, saying it would address the reports later.

Israeli broadcaster Reshet 13 TV News said militants were holding Israelis hostage in the town of Ofakim, and that five Palestinian militants had been killed in the town of Sderot and homes had been set on fire.

Israeli media reported gunbattles between bands of Palestinian fighters and security forces in towns in southern Israel. Israel’s police chief said there were “21 active scenes” in southern Israel.

In Gaza, people rushed to buy supplies in anticipation of days of conflict ahead. Some evacuated their homes and headed for shelters.

Hamas military commander Mohammad Deif announced the start of the operation in a broadcast on Hamas media, calling on Palestinians everywhere to fight.

“This is the day of the greatest battle to end the last occupation on earth,” he said, adding that 5,000 rockets had been launched.

Israel and Hamas fought a 10-day war in 2021.

‘PLEASE SEND HELP’

Speaking to Israel N12 News by phone from Nir Oz, a kibbutz near Gaza, a woman identified as Dorin said militants had infiltrated her house and tried to open the bomb shelter where she was hiding.

“They just came in again, please send help,” she said. “There are a lot of homes harmed … My husband is holding the door closed … They are firing rounds of bullets.”

Israeli Defence Minister Gallant said “troops are fighting against the enemy at every location” and authorised the call-up of reservists.

Israeli media reported that gunmen had opened fire on passers-by in Sderot, and footage circulating on social media appeared to show clashes in city streets as well as gunmen in jeeps roaming the countryside.

“We were told there are terrorists inside the kibbutz, we can hear gunfire,” a young woman named Dvir, from Beeri Kibbutz, told Israeli Army Radio from her bomb shelter.

BACKDROP OF SURGING VIOLENCE

The escalation comes against a backdrop of surging violence between Israel and Palestinian militants in the West Bank, which together with the Gaza Strip is part of the territories where Palestinians have long sought to establish a state.

It also comes at a time of political upheaval in Israel, which has been riven by deep divisions over moves to overhaul the judiciary, and as Washington works to strike a deal that would normalise ties between Israel and Saudi Arabia.

The Iran-backed Lebanese group Hezbollah said the operation was a “decisive response to Israel’s continued occupation and a message to those seeking normalisation with Israel”.

An adviser to Iran’s Supreme Leader Ali Khamenei congratulated Palestinian fighters for the attack.

Hamas media displayed videos of what it said were bodies of Israeli soldiers brought into Gaza by fighters, and Palestinian gunmen inside Israeli homes and touring an Israeli town in jeeps reportedly been driven into Israel by the attackers.

Reuters was not immediately able to verify the footage.

Hamas media also circulated video footage apparently showing a destroyed Israeli tank.

In Gaza, the roar of rocket launches could be heard and residents reported armed clashes along the separation fence with Israel, near the southern town of Khan Younis, and said they had seen significant movement of armed fighters.

Palestinians in Gaza were bracing for Israel’s response.

“We are afraid,” Palestinian woman, Amal Abu Daqqa, told Reuters as she left her house in Khan Younis.

Others in Gaza expressed disbelief at the infiltration into Israel. “It is like a dream. I still can’t believe it,” said one Gaza shopkeeper.

The attack came a day after Israel marked the 50th anniversary of the 1973 war that brought the country to the verge of catastrophic defeat in a surprise attack by Syria and Egypt.