The Gaza Strip nestles on a flat, sandy piece of land along the Mediterranean coast, but viewed from Jerusalem the territory resembles a quivering volcano.

Ever since Hamas, the Islamist group, took control of the strip last June, the government of Israel has struggled to come up with a Gaza strategy that matches its policy goals. With violence on the rise and the humanitarian situation in Gaza worsening by the day, Israel’s leaders are under pressure to formulate a new approach.

The primary concern for Ehud Olmert, Israel’s prime minister, has been to stop the daily barrage of rockets fired by Gaza-based militants on nearby Israeli cities. Weakening Hamas, regarded by Israel as a terrorist organisation bent on destroying the Jewish state, is another goal. Israel is also determined to secure the release of an Israeli soldier captured by Hamas in 2006.

Direct talks with Hamas have repeatedly been ruled out. But, scarred by Israel’s botched war in Lebanon in 2006, Mr Olmert has also been highly reluctant to order an invasion or other large-scale military operation to destroy Hamas’s military and political infrastructure.

Apart from the high number of casualties such an assault would inflict on civilians and combatants, re-conquering Gaza would mark an embarrassing reversal of the government’s policy of “disengagement” from the strip. Israel pulled all of its settlers and soldiers out of Gaza three years ago, not least because it found that the cost of staying was far higher than the benefits of maintaining a presence in the strip. Finally, it is far from clear how and when Israel could extricate itself from such an invasion, and whether it would lead to a lasting improvement for both Gazans and Israelis.

Yossi Alpher, a security analyst and former adviser to Ehud Barak, Israel’s defence minister, highlighted the Israeli dilemma in an article last week: “We are left with good reasons neither to talk to Hamas nor to reoccupy the Gaza Strip. Yet something has to give. Remember Eli Wallach in The Good, the Bad and the Ugly? ‘If you wanna shoot, shoot; don’t talk.’ We still haven’t decided.”

The pressure on the government to commit to alternative strategies is growing. On the one hand, public anger about the rocket attacks on Israeli cities is rising and an influential chorus of hawkish policymakers has demanded an aggressive military solution to the Gaza problem. Residents of Sderot, the town that bears the brunt of the rocket attacks, have staged a series of demonstrations in Jerusalem in recent weeks, demanding that the Israeli army launch a big offensive against Gaza.

In the opposing corner is a group of voices urging Mr Olmert to agree a prisoner swap with Hamas as well as a ceasefire, which would see the Islamists put a stop to rocket attacks in exchange for an end to Israeli incursions into Gaza.

Doron Almog, a major general in the Israel Defence Force reserves, told Israeli radio last week: “What are our interests? We want Gilad Shalit [the abducted soldier] back, so we have to talk to them, we have to make a deal. We want to stop the rocket fire.” He added: “Ultimately, I think there is no choice but to reach a point of negotiations with them.”

The prime minister has not been swayed. “The idea that there is a magical quick fix to the serious problem of Gaza is an illusion,” says Mark Regev, Mr Olmert’s spokesman.

The government insists that its policy is working. The army has stepped up attacks on militant leaders and strongholds since the beginning of the year, but the main focus is on economic sanctions. Since June, when Hamas seized control of the strip from its Fatah rivals, Israel has imposed drastic curbs on the flow of goods into and out of the strip, including cuts to power and fuel supplies.

So far, however, there has been little evidence to support the government’s upbeat assessment.

Hamas appears to be as deeply entrenched in Gaza as ever, and there has been no let-up in the rockets fired on Sderot and other Israeli towns close to Gaza.

According to the army, more than 800 rockets and mortars have been launched from Gaza this year, a considerable increase from previous levels. Ephraim Kam, the deputy director of Israel’s Institute for National Security Studies, says the government’s approach has “so far clearly failed to achieve results”. However, he cautions that “when you apply pressure on organisations like Hamas, you never know in advance when they are going to break”. He believes there are signs that the Islamist group is losing popular support.

But Israeli policymakers and analysts say the government’s hand could be forced at any minute. They frequently raise the prospect of a single rocket attack killing several people.

Mr Kam says: “Then the government will have no choice but to launch a major offensive.”