Thousands of demonstrators gathered outside the Israeli government compound in Jerusalem on Thursday night to protest against a hostage-release deal as Israel's war cabinet discussed a ceasefire in its continued attack on Gaza.

The rally was organised by a number of right-wing and far-right groups, including the Miluimnikim (Reservists) Camp, the Mothers of Combat Fighters, and various spokesmen for illegal settler communities, according to Haaretz.

Itzik Bonzel, whose son Amit was killed as part of Israel's invasion of the Gaza Strip, said at the protest: "We don't negotiate with enemies [because then] enemies win. Our enemies should know that the Israel Defense Forces is a winning army, not a stammering one."

Israeli Prime Minister Benjamin Netanyahu on Wednesday dismissed Hamas’s support for a ceasefire and ordered troops to prepare to move on the city of Rafah in Gaza's far south, where more than one million Palestinians have sought refuge.

However, US Secretary of State Antony Blinken, speaking in Tel Aviv hours after meeting Netanyahu, said he still saw "space for agreement to be reached".

The fear among the Israeli right, which has largely opposed any ceasefire deal, is that Netanyahu will eventually cede to US pressure and come to terms with Hamas.

There have also been recent protests by groups within Israel who believe that only a hostage exchange deal can secure the release of hostages.

However, for Thursday’s protesters, the prospect of any such deal is unthinkable, with many believing the lives of Israeli hostages are of secondary importance to the goal of defeating Hamas. 

"The only realistic way to free the hostages is to make it clear to the murderers in Gaza that if their own lives are precious to them, they should give them back. It's possible to give in, but then there won’t be any communities near the border and there won’t be a State of Israel. Each and every one of us will be a target," Rabbi Benny Kalmanzon, of the illegal West Bank settlement of Otniel, told protesters according to Haaretz.

Hopes of an imminent ceasefire were dashed after Netanyahu told a televised briefing on Thursday when he ordered troops to "prepare to operate" in Rafah and that a "total victory" over Hamas was just months away.

In Beirut, a senior Hamas official responded, saying Netanyahu’s "insistence on continuing the aggression totally confirms that the goal... is genocide against the Palestinian people".

Almost 28,000 Palestinians have been killed during Israel's war on Gaza, with almost 70,000 wounded and much of the enclave rendered uninhabitable by Israel's relentless land and air assault.