Israel waged deadly strikes against Lebanon for the 10th day Friday and mobilised more troops after warning it could launch a full-scale ground invasion - despite mounting international calls for a ceasefire.
"The army called up several thousand reserves in order to strengthen our forces against Hezbollah," a military source said after the army again warned residents of bomb-hit southern Lebanon to flee.
Beirut said its army was ready to go into battle if Israel invaded, an action that would sharply raise the stakes in a conflict that has killed close to 340 people in Lebanon and raised fears of a humanitarian catastrophe.
Waving white scarves, residents of the south streamed to safer havens in the north as buses and boats continued to ferry thousands of foreigners out of Lebanon in one of the biggest mass evacuations since World War II.
Israeli combat jets and artillery were back in action in raids that killed four people in the eastern town of Baalbek - a Hezbollah stronghold near the site of ancient Roman temple ruins - and one in the southern port city of Tyre.
Two Israelis were also seriously wounded when rockets fired from Lebanon exploded in the northern port city of Haifa, the latest salvos in a deluge of nearly 1,000 rocket attacks since cross-border violence flared on July 12.
UN Secretary General Kofi Annan on Thursday demanded an immediate ceasefire, highlighting the human suffering caused by the deadliest cross-border fighting in a quarter century that has also killed 33 Israelis.
"Both the deliberate targeting by Hezbollah of Israeli population centres with hundreds of indiscriminate weapons and Israel's disproportionate use of force and collective punishment of the Lebanese people must stop," Annan said.
He proposed a blueprint calling for the deployment of a stabilization force and for Hezbollah to release two Israeli soldiers whose capture 10 days ago unleashed the Israeli onslaught on its northern neighbour.
But both Israel and Hezbollah rejected the call.
Hezbollah leader Hassan Nasrallah issued a defiant new message that Israel's firepower was failing to dent his fundamentalist Shiite movement and vowed he would only release the soldiers in a prisoner swap.
"Even the whole universe would not be able to secure the release of the two Israeli soldiers unless there are indirect negotiations and an exchange of prisoners," he said.
"All of Israel's claims to have hit half of our missile potential and arsenal are nothing but erroneous words," Nasrallah said, warning of "more surprises" to come. "The leadership of Hezbollah has not been touched."
Israeli troops had battled guerrillas long into the night Thursday after mounting an incursion into Lebanon, leaving four soldiers dead and two Hezbollah fighters. Another soldier was killed when two combat heliopters collided.
Israel has made no secret of its desire to liquidate Nasrallah and has already launched air raids destroying his offices and home and dropped 20 tonnes of bombs on what it believed to be a bunker where leaders were hiding.
Defence Minister Amir Peretz had warned Thursday that Israel would launch a full-scale ground invasion if necessary to crush Hezbollah, which has long been a thorn in the side of the Jewish state.
"Let no terror organisation feel we would cower from any operation," he said. "We have no intention of conquering Lebanon but... we will do it without thinking twice."
Lebanese Defence Minister Elias Murr responded that his army -- which has so far remained on the sidelines in Israel's war on Hezbollah -- would go into battle if Israel invaded.
"The Lebanese army will resist and defend the country and prove that it is an army worthy of respect," he said.
With no sign the international community is closer to brokering a ceasefire despite Annan's call, thousands of foreigners are continuing to be evacuated by sea to Cyprus while others pour across the border into Syria.
US Marines are out in force in Beirut for the first time in 22 years to help take American citizens to the neighbouring island of Cyprus which is being used as the evacuation hub.
The tiny Mediterranean island is however reeling from the influx, battling to find temporary accommodation and flights for the estimated 70,000 people expected to arrive from Lebanon at the height of the holiday season.
Thousands of Lebanese, in cars, trucks and minibuses, are also streaming out of southern Lebanon, where Israel's massive bombardment has left a trail of destruction and raised fears of a humanitarian catastrophe because of a shortage of food and medicines.
"The most basic human rights of the population are at risk or are being violated, including their rights to life, health and food," UN High Commissioner for Human Rights Louise Arbour said.
Israel has imposed an air and sea blocked on Lebanon, put its only international airport out of action, bombed houses, roads, bridges, factories, warehouses and trucks, creating scenes reminiscent of the 1975-1990 civil war.
Prime Minister Ehud Olmert said he was willing to open up a humanitarian corridor to ease the crisis.
French Foreign Minister Philippe Douste-Blazy, on a visit to the region, issued appeals for a ceasefire and help for civilians, warning that the escalating conflict lead to a "catastrophe."
A despondent Lebanese Prime Minister Fuad Siniora, who has issued desperate appeals for help from the international community, said there was no apparent settlement to end hostilities and blamed Israel's top ally in Washington.
"The United States is allowing Israel to pursue its aggression," he said in an interview.
The US State Department said Secretary of State Condoleezza Rice would travel to the region as early as next week to press for a political solution but Washington is refusing to back calls for a ceasefire until Hezbollah halts its rocket attacks.
Israel, which has sent ground troops back into Lebanon for the first time since it ended its 22-year occupation in May 2000, has also been emboldened by strong public support at home.
A poll published Friday found that 95 percent believed that the military action against Hezbollah was "justified and correct".
But even in Israel, doubts were emerging about the effectiveness of an offensive that has failed to stop Hezbollah fire, eliminate its leadership or push fighters back from the border.
Israel is also pushing on with its air, sea and ground offensive on the Gaza Strip, where at least 106 people have been killed in two weeks, and warned civilians that homes storing weaponry were now targets.
The operation was launched with the aim of retrieving a soldier snatched by Palestinian militants and stopping rocket fire.
Palestinian prime minister Ismail Haniya, whose Hamas-led government has seen its ministries bombed and ministers arrested, warned Arabs and Palestinians were at "strategic risk" from Israel's parallel offensives.