An Israeli minister said his government has rejected an European Union plan to link the Gaza Strip with the West Bank, according to Israeli media on Wednesday.
Armed Israeli drones and F-16 warplanes have pounded various areas across the besieged Gaza Strip, killing at least a Palestinian and injuring several others.
The source, speaking on condition of anonymity, said that as part of the deal, which was brokered by Egypt and the United Nations with input from Turkey and Qatar, Hamas and Israel would initially observe a two-week trial cease-fire.
Jamie McGoldrick, the United Nations' humanitarian coordinator for the Palestinian territories, in a news release called Israel's restriction of fuel imports "a risky practice, with grave consequences on the rights of people in Gaza".
The incident capped a day of tension in the Gaza Belt region, a day after IDF tanks shelled a Hamas guardpost after mistaking a training exercise for aggression directed towards Israel.
However, fighting between Israel and Hamas continue despite the ceasefire talks.
Palestinians militants have also fired rockets into Israel and the Israeli military has carried out dozens of air strikes in the enclave.
Earlier on Wednesday, air raid sirens warning of incoming rocket fire sent Israeli residents of communities along the tense Gaza border scrambling for shelter before the Israel Defense Forces (IDF) determined them to have been a false alarm.
Gaza's Health Ministry announced that a Palestinian was killed in northern Gaza, while at least six others were injured in airstrikes across the coastal sliver.
"As of now, approximately 70 rocket launches were identified from the Gaza Strip at Israeli territory", the army said in a statement.
Clashes along the Gaza border since the end of March have seen at least 160 Palestinians killed by Israeli fire.
The Swedish vessel, named "Freedom for Gaza", was intercepted on August 4th and taken to Israel's port Ashdod its organizers said - the second such boat of the "Freedom Flotilla" prevented from reaching Gaza.
The violence came after two fighters from the military wing of Hamas, which governs Gaza, were killed by Israeli fire on Tuesday.
Hamas warned Israel - with which it has fought three wars since 2008 - it would pay for the attack.
The agreement stipulates Gaza's Rafah border crossing to Egypt will be permanently opened and the Kerem Shalom crossing, the blockaded enclave's only intake point for commercial goods, will ease restrictions "dramatically", according to the report.