An explosion and a flare were seen across the Gaza Strip on Thursday morning as Israel and Hamas agreed to the “first phase” of US President Donald Trump's peace plan to pause fighting and release at least some hostages and prisoners.

The agreement was put forward by the president's administration and would represent the biggest breakthrough in months in the devastating two-year-old war.

Israeli Prime Minister Benjamin Netanyahu said on social media, “With God’s help we will bring them all home.”

Hamas said it had agreed to a deal that will lead to the end of the war in Gaza, the withdrawal of Israeli troops, the entry of aid into Gaza and the exchange of prisoners for hostages.

Hamas called on Trump and the mediators to ensure that Israel implements all the provisions of the deal “without disavowal or delay in implementation of what was agreed upon.”

Hamas plans to release all 20 living hostages this weekend, people familiar with the matter told The Associated Press, while the Israeli military will begin a withdrawal from the majority of Gaza.

While many questions remain, the sides appear to be closer than they have been in several months to ending a war that has killed tens of thousands of Palestinians, destroyed most of Gaza and triggered other armed conflicts across the Middle East.

The war has sparked worldwide protests and brought widespread allegations of genocide that Israel denies.

Israel is more isolated than it has been in decades and bitterly divided over the failure to return the hostages.

The Palestinians’ dream of an independent state appears more remote than ever despite recent moves by major Western countries to recognize one.