By Nidal al-Mughrabi and Emily Rose

GAZA/JERUSALEM (Reuters) -Trucks carrying aid crossed into southern Gaza on Saturday, the first convoy of humanitarian supplies since Israel began a devastating siege 12 days ago and after further heavy Israeli bombardment overnight that killed dozens of Palestinians.

U.S. President Joe Biden had said this week that agreement had been reached for 20 aid trucks to cross through Gaza's Rafah border point with Egypt, and added on Friday he believed those first trucks would pass through within 48 hours.

Witnesses said aid trucks exited the crossing after checks and proceeded into Gaza's southern area including the major towns of Rafah and Khan Younis where hundreds of thousands of people displaced by Israel's unrelenting air war are sheltering.

However, Palestinian officials were disappointed that fuel supplies were not included and added that the aid was only three percent of what used to get into Gaza before the crisis.

"Excluding the fuel from the humanitarian aid means the lives of patients and injured will remain at risk. Gaza hospitals are running out of the basic requirements to pursue medical interventions," the Gaza health ministry said.

Israel's "total siege" of Gaza after the Oct. 7 cross-border attack on southern Israel by militants of the Islamist movement Hamas has left Gaza's 2.3 million people running out of food, water, medicines and fuel.

The United Nations said the convoy included life-saving supplies that would be received and distributed by the Palestinian Red Crescent, with Hamas' consent. Israel has warned that no aid should end up in Hamas hands.

"The humanitarian situation in Gaza – already precarious – has reached catastrophic levels," U.N. humanitarian chief Martin Griffiths said in a statement.

"I am confident that this delivery will be the start of a sustainable effort to provide essential supplies – including food, water, medicine and fuel."

U.N. officials say at least 100 trucks daily are needed and that any aid operation must be sustainable at scale - a tall order now with Israel carrying out devastating bombardments of the enclave day and night.

Before the outbreak of conflict, an average of about 450 aid trucks were arriving daily in Gaza.

FIRST TWO HOSTAGES RELEASED

Israel kept up heavy bombardment of targets throughout Gaza in Saturday's early hours after Prime Minister Benjamin Netanyahu vowed to "fight until victory" following the release of the first two hostages by Hamas.

Hamas on Friday freed Americans Judith Tai Raanan, 59, and her daughter Natalie, 17, who were among around 210 kidnapped in the assault on southern Israel by Hamas this month. Hamas said it acted in part "for humanitarian reasons" in response to Qatari mediation.

Hamas gunmen seized the hostages when they burst out of the blockaded enclave into Israel and killed 1,400 people, mainly civilians, in a shock rampage, the deadliest single attack on Israelis since the country's founding 75 years ago.

Gaza's Health Ministry said on Saturday Israel's air and missile strikes had killed at least 4,385 Palestinians, including hundreds of children, while over a million of the besieged territory's people have been displaced.

Israel has amassed tanks and troops near the fenced border around the small coastal enclave for a planned ground invasion with the objective of annihilating Hamas, after several inconclusive wars dating to its seizure of power there in 2007.

OVERNIGHT ATTACKS

Overnight Israeli fighter jets struck a "large number of Hamas terror targets throughout" Gaza including command centres and combat positions inside multi-storey buildings, the military said in a statement.

Gaza's health ministry and Hamas media said Israeli aircraft had overnight targeted several family houses across Gaza, one of the world's most densely populated places, killing at least 50 people and injuring dozens.

Hamas said it fired rockets towards Israeli's biggest city Tel Aviv on Saturday in response to those deaths. The Israeli military reported a fresh salvo of rockets from Gaza against southern Israeli border communities before dawn. There was no immediate word of any casualties.

Terrified Palestinians who were forced to evacuate their homes after Israel's deadly overnight bombings lashed out at the reports of aid trucks about to enter Gaza, saying it was a ceasefire and not food that they needed.

"They were asleep when the missile was dropped on them, innocent children, their father, their grandfather, what did they do? Did they fire rockets? Carried bullets? They are innocent children who did nothing!" cried one tearful woman.

"We have been fighting and the Arab nations are just watching. Canned food, is that the price of the Palestinian people who are offering sacrifices everywhere?"

Most of Gaza's inhabitants depend on humanitarian aid. The heavily urbanised coastal strip has been under Israeli and Egyptian blockade since Hamas seized control of it after Israeli ended a 38-year occupation.

Israel has told all civilians to evacuate the northern half of the Gaza Strip, which includes Gaza City. Many people have yet to leave saying they fear losing everything and have nowhere safe to go given that southern areas have also been bombarded.

The United Nations humanitarian affairs office said more than 140,000 homes - nearly a third of all homes in Gaza - had been damaged, with nearly 13,000 completely destroyed.

'CAIRO PEACE SUMMIT'

Diplomacy to secure a ceasefire has been fruitless so far.

Egypt held a summit on the Gaza crisis on Saturday to try to head off a wider regional war but assembled Middle Eastern and European leaders were expected to struggle to agree a common position on the Israel-Hamas conflagration.

Arab leaders at the summit condemned Israel's two-week-old bombardment of Gaza and demanded renewed efforts to reach a Middle East peace settlement to end a decades-long cycle of violence between Israelis and Palestinians.

Palestinian President Mahmoud Abbas said Palestinians would not be displaced or driven off their land. "We won't leave, we won't leave," he told the summit.

The United States, Israel's closest ally and a vital player in all past efforts towards Middle East peace, only sent the charge d'affaires of its embassy in Cairo. Israel was absent, as were several other major Western leaders, cooling expectations for what the hastily-convened event could achieve.

(Reporting by Nandita Bose in Washington and Nidal al-Mughrabi in Gaza, and the Washington and Jerusalem Bureaus; Writing by Idrees Ali, Stephen Coates and Keith Weir; editing by Lincoln Feast and Mark Heinrich)