Here's the latest on the situation from AlJazeera:

Fresh Israeli air raids have killed at least eight Palestinians in the Gaza Strip and wounded dozens more, medics say, with Palestinian security sources confirming that at least three of the dead were Hamas fighters.

Israel on Saturday expanded its fierce air assault on rocket operations, striking Hamas government and security compounds, tunnels and electricity transformers after an unprecedented rocket attack on Friday aimed at the holy city of Jerusalem raised the stakes.

The Israeli army said that four of its soldiers were injured by a rocket fired from Gaza. Meanwhile, a newly installed battery of Israel's Iron Dome defence system successfully intercepted a Gaza rocket aimed at Tel Aviv on Saturday.

Palestinian medics said 40 Palestinians have been killed and 345 wounded since Israel launched the aerial campaign against the Palestinian enclave on Wednesday.

In the same period, three Israelis have been killed and 18 injured, including 10 soldiers.

Since the start of its operation, Israel's army said it carried out some 700 airstrikes. It also said that fighters have fired more than 580 rockets over the border, 367 of which hit southern Israel, and 222 of which were intercepted by the Iron Dome anti-missile system.

Also now at AlJazeera, breaking news banners read "Israeli air strike hits main gaza police headquarters and prime minister ismail haniyeh's office," and "Israeli cabinet approves plan to call up 75,000 reserve soldiers as air strikes continue on the gaza strip," with no further details as yet.

An update this morning on the situation: Hamas launched a rocket into Jerusalem on Friday, the first time the current conflict with Israel has expanded outside of Gaza. Israeli media said the rocket landed outside the city and there were no causalities. A ceasefire Friday between Israel and Hamas collapsed after just three hours when Palestinians continued launching rockets over the border, and Israel resumed airstrikes in retaliation. The ceasefire had been planned for Egyptian Prime Minister Hesham Qandil’s visit to Gaza. The Israeli military also announced Friday morning that it was calling up 16,000 reservists for a potential ground operation. More on this from the Washington Post.
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Israel is continuing to pound the Gaza Strip with air strikes amidst fears that Israel could soon launch a ground invasion into Gaza. Israeli troops, tanks and armored personnel carriers are now massing near the Palestinian territory. Earlier today, 85 missiles exploded within 45 minutes in Gaza City, sending black pillars of smoke. At least 21 Palestinians have died in the most recent round of violence, while three Israelis died on Thursday. Israel said it launched 150 air strikes overnight, while Palestinians fired a dozen rockets into Israel. Israel has started to draft 30,000 reserve troops in a sign the assault may soon widen. Among the casualties of Israeli violence was the 11-month-old son of a BBC Arabic journalist, Jihad Misharawi. Egyptian Prime Minister Hisham Kandil traveled to Gaza today to condemn the Israeli attack. For more, Democracy Now! gets a report from Rafah by Palestinian journalist Mohammed Omer, who says, "One thing that we ought to talk about here is the humanitarian situation in the Gaza Strip. This is a situation of targeting a population of civilians, exactly like Israel is shooting in a fishbowl. And there is no shelter, and there is nowhere to run for the general population. Gaza is living in a very dire situation." Amy Goodman of Democracy Now! also speaks with Gershon Baskin, the founder of the Israel/Palestine Center for Research and Information, who was the initiator of the secret talks between Israel and Hamas for the release of Israeli soldier Gilad Shalit.

A rush transcript follows below the fold.

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Rioters stormed the U.S. embassy in Yemen on Thursday morning, breaching the wall of the embassy and setting fire to vehicles as security forces reportedly opened fire. Security forces managed to gain control of the compound in Sanaa by using the live ammunition, tear gas and water cannons, injuring several people, although protests continued outside the embassy walls. Protests have broken out throughout the Muslim world over an amateur U.S. film that depicts the prophet Muhammed as a fraud. In Cairo, protests continued for the third day on Thursday outside the U.S. embassy, with at least 10 people injured in overnight clashes. In Libya, the U.S. ambassador and three others were killed on Tuesday by riots over the film outside the U.S. consulate in Benghazi.

U.S. officials say that it is "too early" to say who carried out the fatal attack in Benghazi, but members of both the House and Senate intelligence committees believe that it may well have been the work of al-Qaeda:

The attack in Libya that also killed three other U.S. personnel bore the hallmarks of al-Qaeda and may have been carried out by the group’s North Africa affiliate to mark the anniversary of the Sept. 11 attacks on the U.S., said Michigan Republican Representative Mike Rogers, chairman of the House intelligence committee.

“It certainly appears to me the significance of this date was important,” Rogers told CNN yesterday. Senator Dianne Feinstein, a California Democrat who heads the Senate intelligence panel, also told the network the attack may have been premeditated.

It may have been the work of al-Qaeda because “the weapons were somewhat sophisticated, and they blew a hole in the building and started a big fire, and that’s how the ambassador died, in a fire,” Feinstein said.

There is also a possibility that the attack was "planned," and that the protest was either a ruse, or the attackers took advantage of the protest as a distraction from their activities :

The chaotic scene was described by senior Obama administration officials, Libyan government officials and witnesses. Details about the attack were still emerging late Wednesday. Key facts remain unclear, particularly how Stevens died and how his body wound up at a Benghazi hospital.

Even as evidence was being assembled, the early indications were that the assault had been planned and the attackers had cannily taken advantage of the protest at the consulate.

“Was this a spontaneous act of violence, was this capitalizing on the opportunity posed by [a protest], or was this separate and apart from al-Qaeda?” asked Rep. Adam B. Schiff (D-Calif.), a member of the House intelligence committee. “Any of those are possible,” Schiff said, but accounts of the attack and the firepower employed “indicate something more than a spontaneous protest.”

In response, the Pentagon has ordered two warships to the Libyan coast which carry Tomahawk cruise missiles, although they have no specific mission at this time.