Israel’s war against Hamas in Gaza has killed 25,000 Palestinians, the health ministry in the territory has announced, as the UN chief described the scale of civilian killings as “heartbreaking and utterly unacceptable”. Most of the casualties were women and children, the ministry said, and thousands more bodies were likely to remain uncounted under rubble across Gaza. Speaking at a global summit in the Ugandan capital of Kampala, the UN secretary general, António Guterres, denounced Israel’s three-month assault. “Israel’s military operations have spread mass destruction and killed civilians on a scale unprecedented during my time as secretary general,” Guterres said at the opening of the G77+China, a coalition of 135 developing countries. “This is heartbreaking and utterly unacceptable. The Middle East is a tinderbox. We must do all we can to prevent conflict from igniting across the region.” Israel has ignored international outrage at the toll exacted on Gaza by its offensive, which was launched in response to Hamas’s attack into southern Israel in which 1,200 people were killed, mostly civilians in their homes and at a music festival. Hamas also seized about 250 hostages, of whom 132 remain in Gaza, though at least 27 are believed to have been killed. Israeli forces are advancing into southern parts of Gaza crowded with those who have fled combat elsewhere. At least a million displaced people are believed to have sought refuge in the small town of Rafah on the border with Egypt, where they are living in makeshift camps, UN-run shelters and private apartments. Thick plumes of smoke billowed above the main southern city of Khan Younis on Sunday morning as the Israeli army said it had “eliminated a number of terrorists” there. There were also reports of renewed fighting in the north, which Israeli troops are struggling to clear of Hamas militants who use an extensive tunnel network to launch surprise attacks. At least 178 bodies had been brought to Gaza’s hospitals in the past 24 hours, along with nearly 300 wounded people, according to Ashraf al-Qidra, a health ministry spokesperson. The Hamas government’s media office said the dead and injured “could not be transferred to hospitals because of the continued artillery shelling on ... Khan Younis and the Tal al-Hawa area in Gaza City and the north”. In a briefing on Saturday evening, the Israeli military spokesperson Daniel Hagari said troops had found a tunnel in Khan Younis where some hostages had previously been kept. Among the evidence of their presence were paintings, including by a five-year-old captive, he said. About 20 hostages had been held there at different times, he said, “in difficult conditions without daylight ... with little oxygen and terrible humidity”. Soldiers entered the booby-trapped tunnel and fought a battle with militants in which “the terrorists were eliminated”, Hagari said. Over the course of the war, the Israeli military has expressed regret for civilian deaths but accuses Hamas of operating in densely populated areas and using civilians as human shields, a charge the group denies. Benjamin Netanyahu has repeatedly pledged to pursue the offensive in Gaza until “total victory”, but commentators in Israel have questioned the conduct of the war, arguing that the offensive’s goals are unrealistic and accusing the Israeli prime minister of indecision. On Saturday, Netanyahu again rejected Joe Biden’s call for a Palestinian state after the war. His office said that in talks on Friday with the US president, Netanyahu “reiterated his policy that after Hamas is destroyed Israel must retain security control over Gaza to ensure that Gaza will no longer pose a threat to Israel, a requirement that contradicts the demand for Palestinian sovereignty”. Grant Shapps, the British defence secretary, said Netanyahu’s refusal was “disappointing” but not a “surprise”. “I don’t think we get to a solution unless there’s a two-state solution,” he told the BBC. In a small concession to Washington, Israel announced on Sunday it had agreed a plan for frozen Palestinian tax funds to be held by a third-party country. Netanyahu is under growing domestic pressure to secure the return of the hostages and account for the security failings surrounding the October attack. Thousands of people protested across Israel on Saturday evening to demand the release of the hostages and early elections to oust Netanyahu. Avi Lulu Shamriz, the father of Alon Shamriz, a hostage mistakenly killed by Israeli troops earlier in the war, said Netanyahu’s strategy was wrong. “The way we’re going, all the hostages are going to die. It’s not too late to free them,” he said. Humanitarian officials have repeatedly called for more aid to enter Gaza as disease and famine loom. Diplomatic efforts have sought to secure more deliveries and a truce similar to the week-long cessation of hostilities in November during which Hamas released dozens of hostages in exchange for Palestinian prisoners held by Israel. Guterres said Netanyahu’s refusal to accept the two-state solution for Israelis and Palestinians was totally unacceptable, and that denying Palestinians the right to statehood “would indefinitely prolong a conflict that has become a major threat to global peace and security”. In the restive occupied West Bank, the Israeli military said it had demolished two houses in Hebron belonging to two Palestinian gunmen who carried out an attack on a road between Jerusalem and Bethlehem in November. Rising tensions and violence across the Middle East have stoked fears of a wider conflagration involving Iranian-backed groups in Lebanon, Iraq, Syria and Yemen. The biggest fear is of a new conflict on Israel’s northern border, where clashes that began in October have intensified in recent weeks. Analysts say both Israel and Hezbollah are carefully calibrating their use of violence, but that there had been a significant increase, with a far greater risk of inadvertent escalation leading to war. Two Hezbollah fighters were killed on Sunday when an Israeli drone hit their vehicle in southern Lebanon, security sources said. It was the latest strike in an area where Israel has targeted dozens of Hezbollah fighters. Israel’a military said it did not comment on foreign reports. Earlier, residents and security officials said a drone killed two people and injured at least four others near the village of Kafra, five miles from the border. Hezbollah has said its campaign of cross-border strikes has aided Palestinians by stretching Israeli forces and driving tens of thousands of Israelis from their homes. It has come at a cost, with about 140 Hezbollah fighters and at least 25 Lebanese civilians killed, as well as at least nine Israeli soldiers and a civilian. Underlining the instability in the region, Iranian media said an Israeli strike on Damascus on Saturday had killed the Revolutionary Guards’ spy chief in Syria and four other Guards members.