A top Egyptian mediator said on Monday he had 'high expectations' that a ceasefire deal could be reached between Israel and Hamas Islamists controlling the Gaza Strip.

Omar Suleiman, Egypt's intelligence chief, held talks with Israeli Defence Minister Ehud Barak in Tel Aviv on a truce, ahead of a meeting in Jerusalem with Prime Minister Ehud Olmert.

Asked by reporters about his expectations, Suleiman held up his thumb in a gesture of optimism and replied in English: 'High expectations.'    

A statement issued by the defence ministry after the meeting quoted Barak as telling the mediator: 'Israel will have to take broader action in the Gaza Strip if the firing of Qassam rockets and mortar bombs does not stop.'    

Following talks with Suleiman in Cairo last month, Hamas offered a six-month halt to hostilities in the Gaza Strip if Israel were also to lift a crippling embargo on the coastal Palestinian territory.

Washington has backed the mediation in hope of curbing violence, including rocket fire from the Gaza Strip and Israeli raids in the territory, which has threatened to derail peace talks between Olmert and Palestinian President Mahmoud Abbas.

A spokesman for Olmert rebuffed the initiative when it was broached. But Israeli officials have said Israel would have no reason to launch military operations in the Gaza Strip if Palestinian militants ceased their attacks and arms smuggling.

In the Gaza Strip, Hamas leader Ismail Haniyeh said he wished Suleiman success and called on Israel to 'respond positively to the Egyptian efforts and to lift the siege and open the (border) crossings'.

Another Hamas leader, Mahmoud al-Zahar, said he hoped Israel would 'see reason' and that the group would receive the Israeli response to the truce proposal on Tuesday.

Hamas seized Gaza from Abbas's Fatah faction last June, prompting Israel to step up economic sanctions and Egypt to shut its frontier with the coastal enclave.

'We see our relationship with Egypt as one of the central foundations of regional stability, and a pillar of our foreign policy, and we are always eager to engage with the Egyptian government,' Olmert spokesman Mark Regev said.

Egypt would want to turn any Gaza truce into a similar future deal in the Israeli-occupied West Bank. Barak told Suleiman that Israel would continue to 'reserve the right of freedom of action in the West Bank to ensure the security of Israeli citizens', the defence ministry statement said.

Abbas's Palestinian Authority has said Israeli raids in the West Bank undermine its attempts to restore law and order in the territory. - Reuters