Israeli hostages dragged over the border, either from homes or Music Festival. By now, you have seen the truly horrific images of families with small kids, grandparents, and young people being paraded through the streets of some of themcansccording to the u. S. State deparent. In a moment, ill bed by the nfc coordinator of strategic communications, john kirby at the white house. Lets get to the reporting. Richard engel reporting from the border city this afternoon. Stay down, down. Reporter there has been a lot of incoming fire here. We believe that it is mortar fire. Some of them also appear to be rockets. They have been coming in quite close. That is why we are on the ground right now. Joining us now from telaviv is chief correspondent ali velshi, thank you for being with us. In the time that weve spoken since we last spoke, weve seen a number of counter strikes on gaza, smoke in the air. Fires, explosions and whatnot. How does it sound from tel aviv . Raf a little bit earlier was hearing nonstop barrages, are you hearing anything there . Reporter thats right, yes, about 10, 12 minutes ago, we heard eight what sounded like interceptions, each one successively closer. About this time yesterday is when it was in the heat of the rocket fire that was coming in from gaza. And the planes and helicopters that were dropping bombs on gaza. We did hear a number of jets flying over us. Heres the thing, last night, israel said it hit 500 sites, hamasoriented sites, hamasrelated sites, either operational sites of government sites. Hamas put out a Statement Today to say if any residents are killed or any residences are hit, they will execute one hostage for each time that happens. Now, there were civilian casualties last night, in fact, so that has upped the ante, there are of course these hostages in gaza. Heres the other problem. There was an incursion in the north of this country from lebanon. That was pushed back today. But thats whe hezbollah opat out of. There is stuff going on in the west bank. Two Police Officers were killed tonight. Thats been something thats been going on for about ten months, and its heating up and theres the situation in the south. So the government has called up 300,000 reservists, which is unheard of in the history of this country, and as you heard, Prime MinisterBenjamin Netanyahu is saying that the revenge that they will impact on gaza in the coming days will echo for generations. Thats what he said. So things are only getting hotter here, katy. The Civil Defense authorities here have reminded israelis across the country to store up to three days worth of water and nonperishable goods in the anticipation that this becomes a broader war. And gaza has been besieged, the israelis have said, they will not allow any food, fuel or water into gaza. Gaza does not have its own icity generation, its done by a plant that usesiesel fuel. The diesel comes in largely through israel. They have about three days worth of diesel fuel left. In three days, gaza runs out of fuel. It also runs out of electricity at the same time because thats how they generate their electricity. So theres a lot going on. The United Nations says that more than 120,000 gazans are now out of their homes. They dont have a place to live. Theyre displaced. So everything about the story is getting worse by the hour, katy. And the eu has said its going to halt all of its aid to Palestinian Development projects, writing that this is about the European Union, the european commission, who are the biggest donor for the palestinian authorities. Its about them figuring out whether any of this money they give them is going to people who are aligned or helpful to hamas. They dont want any of that money going there. Ali, the last major war that israel had with gaza, with the palestinians was the sixday war, the yom kippur war. Is there any expectation that this is just going to last six days . Reporter you know, there are concerns. Theres nobody ive talked to in israel who has said this is going to be over in a few days, were going to be able to take care of it. It cant. What israel has is remarkable fire power. Its kind of interesting because a u. S. Strike force of ships is coming in, is here now, to provide air support, but israel doesnt actually need that. Its got no problem with air superiority. Theres no air defense in gaza, effectively. The issue here is what do you do about hamas in gaza. What do you do about the hostages. This is a very densely populated area, and its unclear how they are going to get those hostages out. Theres some discussion that may be qatar is negotiating a deal to release some of the prisoners. But that becomes biggest problem. Most israelis understand that this is probably going to get worse before it gets better, and theyre not entirely sure how this ends. Theres a lot of attention. There are people who say they ever either never felt this way in israel or they certainly havent felt this way since the sixday war. I think its interesting the Prime Minister didnt mention the hostages in that speech. When i asked one of the deputies at the israeli mission, or Israeli Embassy in washington, d. C. About whether a trade would happen, he said its not the time to talk about that. Well see if it is actually going on behind the scenes. Let me clarify myself, the sixday war was a war between arabs and israelis, israel and egypt and syria, just to be clear. Ali velshi, thank you very much. And joining us from beirut, lebanon, is nbc news Foreign Correspondent matt bradley. Give us the latest on whats happening from there and hezbollah. We heard hezbollah confirm that four fighters have been killed. A major escalation from before. A couple of hours ago we were talking about one who was killed. Yesterday, the day before there was cross border fighting. There were no real deaths or any major injuries. Now were really seeing this escalating very very quickly, and thats very very threatening for the entire region. This would mark the first internationalization of a blistering conflict that has captured the worlds attention, and now were starting to see other actors in play. Hezbollah, like hamas is backed by iran. If we start to see lebanon, he has hezbollah and some military groups, we dont know how far this is going to go but this is crossing borders, we dont know whether or not other countries could be wrought in and whether or not this could turn into a regionwise war. Matt bradley in lebanon, thank you very much. They cut off the electricity and now the Israeli Military has ordered a complete siege of the gaza strip, halting deliveries of food, water, fuel, and supplies to the 2 Million People living in one of the worlds most densely populated areas. The eu is halting aid to palestinian authorities saying the Commission Wants to make sure none of its funding goes to anyone linked to hamas. Joining me is head of palestinian Israel Program and Senior Fellow at the arab institute, yusef, and msnbc anchor, Ayman Mohyeldin. Israel didnt see this coming. This was a surprise to american intelligence as well by all accounts, and were its said to have been a surprise to hamas as well, their ability to execute something on this scale. As you were watching the news come in, what was your reaction as somebody who has a history of covering this conflict . Yeah, i would like at it in two ways, and i would look at it in the technical capabilities of hamas and what hamas was able to pull off and surprise everyone in terms of their capabilities, the resources they had, the para gliders, the innovative nature of the attack. Its kind of like, again, since everyone is talking about the 9 11 comparison, our failure to imagine somebody hi jacking an airplane and using it as a missile against our building but having spent time on the ground in the west bank and living in gaza for a couple of years, i was not surprised by the determination of hamas to try to inflict some kind of attack on israel. That is something they have made clear time and time and time again, and it is something that a lot of western officials, israeli officials, certainly israelis who have talked about it, if you decapitate hamas, you go after their spiritual leader, kill the bomb makers, the drone makers, that somehow theyre going to lose their resolve, going to lose their desire to carry out this kind of attack, and that didnt surprise me. The severity of it, the close range massacre of civilians, the festival, at a bus stop, inside their homes, the kidnapping of families, Young Children parading young kids in the street, mocking them as they call out to their mothers. I mean, is there support for that sort of stuff . I would say the palestinian body, if you will, and i use that word between palestinians in the west bank and east jerusalem, gaza, refugees, palestinians that live in the United States, theyre not monolithic, and i think it would be very reducktive to say do palestinians support this . I dont think any human being who looks at an 8yearold kid being dragged into gaza is saying, oh, this is exactly what i want. This is exactly what i want my people to be doing. So i think thats not right way to look at it. I dont mean that in the sense that the question is wrong, theres no way to answer that question. Its not easy to say do palestinians support this. I will tell you having spent time on the ground, palestinians want the International Community to care about their children just as much as they care about every other children that is being killed as a result. Yusef, what is the answer here . Israel is going to fight back with a lot of fire and fury, its going to get really bad for gaza and a lot of the civilians that are in gaza. Is there a Military Solution to this . Can israel take out hamas militarily . You know, katy, theres no Military Solution to this. There never has been the last 16 or so Israeli Military operations in gaza have all claimed that they were going to do the same thing, and we saw in the last several days, the capabilities from gaza are greater than ever. If there was a Military Solution to this, the Strongest Military power in the region, and in the world, the United States would have found it already. It doesnt exist. I want us to just sit with a moment, with the depravity of some of the things we heard from the israeli Prime Minister and other israeli officials who youve talked to in the last hour or so. You asked an israeli diplomat a little while ago about civilians in gaza and what they intend to do to take care to not kill civilians in gaza. We have seen multiple rounds of this, and usually they are pretty boilerplate israeli answers to those questions. Were going to avoid civilian casualties, were going to target with precision, we follow the rules of war. You didnt hear any of that this time at all. All he said is we are a nation at war. There is an expectation now from the israelis that the United States and other allies are going to be prepared to back massacres of civilians in the gaza strip. We need to sit with the gravity and urgency of this in this moment. The Aircraft Carrier that was sent to the region is there to send a message to other players in the region not to get involved No Matter What israel is doing on the ground. Look, every time that there is israeli bombardment of gaza, its civilians that pay the highest price and the israelis are led by a leadership that clearly has demonstrated its incompetence in security and is looking to prove its might and strength and in the words of the israeli Prime Minister, its vengeance. Our government has a responsibility here too, and its going to be our weapons that are perpetrating these attacks. This is incredibly serious, and if there are responsible leaders on pennsylvania avenue, they should be on the found with everybody in the region, demanding an immediate end to hostilities, not giving this any rope but bringing an end to it now because it will spiral out of control, and once it does, its very hard, its very hard to bring anything to a conclusion. What do you say to those when they will say back to you, what does israel do in the face of what we have seen with the slaughter we have seen, the hostages being pulled back and the videos and the truly atrocious stuff that is coming out. I mean, full stop, atrocious stuff. What does israel do in response to that . Look, theres absolutely nothing easier to do in the United States than to condemn palestinians for violence. But unfortunately if we turn our backs can we condemn hamas for the violence, not palestinians but hamas . We can condemn anyone and everyone for the violence, this is not the issue, but its how genuine are we in this condemnation, and what i mean by that is if we turn our backs away from the root causes of this violence, the only thing that we are condemning is israelis and palestinians to continued rounds of this time and time again. The easiest thing to do is send statements and send weapons. People are dying. If we are committed to ending this didnt start yesterday. Hamas didnt declare war on israel yesterday. Israel has been at war with the Palestinian People for 75 years. Unless theres a genuine effort, a Real International effort to bring peace and justice to address the Palestinian Struggle for freedom, were not being honest with israelis or palestinians or anyone else when we say we condemn violence because we are sponsoring it and supporting it by ignoring root causes. Let me ask you what the solution is, if its not a Military Solution and has to be a diplomatic solution, how do you find it when your neighbor doesnt believe you have the right to exist . Which neighbor are you talking about . Hamas, theyre the ones that are in control of gaza. The Palestinian Authority doesnt have control over gaza, and theyre not necessarily that strong in the west bank, so what do you do . Who do you negotiate with . How do you find a settled peace that lasts . An important question, not enough time in a single hour to answer. Its more important about the principle, the mechanism, heres what i mean by that. The shortterm solution is for israel to recover the hostages that have been taken into gaza. Is that Trading Prisoners . That is a decision israel is going to have to make. It has to decide what is the value of the israeli lives it wants to save, and release them as they have in the past negotiations for prisoner swaps. Keep in mind from a palestinian perspective, israel has thousands of palestinians including women and children that are held, many of them in arbitrary detention, many of them who have not had a fair judicial process. When youre asking for the release of the palestinians, tgs not that youre asking for the release of terrorists. Israel is going to say theyre terrorists but the truth is they are not terrorists. They are women and children being held illegally by israel. Put that aside because thats the shortterm question to how do you get out of this situation. If youre trying to solve the longterm process, how do you get a mechanism in place that allows the two sides to sit around the negotiating table, you have to speak clearly about what the root problems are, and its not going to be writing a blank check to israel to give it the belief it can do whatever it wants. Part of the reason we are in this mess is that year after year, decade after decade, the Israeli Governments subsequently have been told by the west that they can do whatever they want, and get a blank check the from United States, and in doing so, the end result is you get a government in israel that believes that the palestinian issue is not fundamental to the core problem in the region, and the false belief that making peace with countries beyond the palestinians is going to come back and solve the palestinian issue. As we have seen, not to go off on a tangent, israel has peace with egypt, the united arab emirate, all the most important countries with the exception of saudi arabia, potentially on the horizon soon, none of that, prevented what happened today. Can i ask you about egypt. Egypt blockades the other end of the gaza strip. What responsibility does egypt have . They have a very important responsibility. To make it clear for our viewers. Egypt has a peace treaty, and its important to remind our viewers, the reason egypt doesnt open the border is not because they dont want to open the border with gaza, it takes a position on two fronts, it has a legal obligation to stay committed to the agreement it has with israel that if it opens the border, its only going to do it with the approval of the European Union and israel. Which is what israel wants, not just egypt. Israel does not want to have egypt having an open board with gaza, so thats one, but two, theres a more important principle, which is egypts position has been gaza is the not the palestinian state, and subsequently over the years, nor and more israeli politicians have been trying to say forget about the west bank, were annexing that. Gaza is the palestinian state. That is going to be the International Recognized palestinian state, and egypts concern is if we do this, if we recognize this to be an international border, we are falling into the hands of the israelis who want egypt to recognize this is now the detack t de facto state. Our