The Israeli military says it has rescued two hostages from captivity in the Gaza Strip after a night of air strikes which killed at least 67 people.

Israeli forces stormed a heavily guarded apartment in the southern Gaza Strip to extract the captives.

To assist the rescue forces, heavy airstrikes pounded the area near the apartment in Rafah, a city on the southern edge of the Gaza Strip.

It identified the freed hostages as Fernando Simon Marman, 60, and Louis Har, 70.

It said both men were kidnapped by Hamas militants from Kibbutz Nir Yizhak in the October 7 cross-border attack that started the four-month Israel-Hamas war.

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Hostage Fernando Simon Marman hugs a relative after being rescued from captivity in the Gaza Strip (Israeli Army via AP)

The army says both men are in good medical condition.

Officials in Rafah say at least 67 people were killed in airstrikes that accompanied the Israeli hostage rescue operation.

An Associated Press journalist in Rafah said strikes hit around Kuwait Hospital, where some of those wounded in the strikes had been brought.

Israel says around 100 hostages remain in Hamas captivity after dozens were freed during a ceasefire in November.

(PA Graphics)

Hamas also holds the remains of roughly 30 others who were either killed on October 7 or died in captivity.

The Israeli government has made freeing the hostages a top aim of its war, along with destroying Hamas’ military and governing capabilities.

However, as the fighting drags on, rifts have emerged over how to retrieve them.

Israeli Prime Minister Benjamin Netanyahu says that persistent military pressure will bring about the captives’ freedom even as families of the hostages and many of their supporters have called on the government to make another deal with Hamas.

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Palestinians walk by a residential building destroyed in an Israeli strike in Rafah (Hatem Ali/AP)

Israel has described Rafah as the last remaining Hamas stronghold in Gaza and signalled that its ground offensive may soon target the densely populated city.

Mr Netanyahu has said that sending ground troops into Rafah is essential to meeting Israel’s war goals.

This comes despite warnings from US President Joe Biden not to conduct a military operation in the Gaza border town without a “credible and executable plan to protect civilians.

More than half of Gaza’s 2.3 million population is now crammed into Rafah, where hundreds of thousands live in sprawling tent camps and overcrowded UN shelters.

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The operation, which was accompanied by airstrikes, killed dozens of Palestinians, according to local health officials (AP Photo/Fatima Shbair)

According to the Hamas-run Gaza health ministry, more than 12,300 Palestinian minors – children and young teens – have been killed in Israel’s war against Hamas.

About 8,400 women were also among those killed.

The ministry does not distinguish between combatants and civilians and provided the breakdown of minors and women at the request of The Associated Press.

Israel claims to have killed 10,000 Hamas fighters.

The European Union’s foreign policy chief, Josep Borrell, called on the US among other countries to stop providing weapons instead of simply demanding that the two sides in the war in Gaza stop killing civilians.

“If you believe that too many people are being killed, maybe you should provide less arms in order to prevent so many people being killed,” Mr Borrell told reporters in Brussels after talks with the head of the UN agency for Palestinian refugees.

The EU’s top diplomat also expressed concern about the likelihood of an imminent Israeli ground assault on Rafah.

He said: “They are going to evacuate. Where, to the moon? Where are they going to evacuate these people?”