The mission by the Israeli military, the Shin Bet security service and a special police unit freed Fernando Simon Marman, 60, and Louis Hare, 70, the military said. They were among 250 people seized during the Oct. 7 raid by Hamas militants that triggered Israel's war on Gaza.
More than four months on, much of the densely-populated strip of land on the Mediterranean is in ruins, with 28,340 Palestinians dead and 67,984 wounded, according to Gaza health officials, with many others believed to be buried under rubble.
The Israeli military says 31 hostages have died in that time, but Prime Minister Benjamin Netanyahu said Monday's rescue showed that military pressure should continue and he brushed aside international alarm at its plans for a ground assault on Rafah.
"Fernando and Louis, welcome home," he said, saluting the Israeli forces who rescued them. "Only continued military pressure, until total victory, will bring about the release of all of our hostages."
The Gaza health ministry said 67 Palestinians had been killed overnight and the number could rise as rescue operations were under way. A Reuters journalist at the scene saw a vast area of rubble where buildings, including a mosque, had been destroyed.
�— UNRWA (@UNRWA) #Gaza Rafah is one of the most densely populated places on earth. Families have been displaced many times.There is panic & desperation as 1.4 million people try to survive, try to get food & water - at the same time fearing for their lives due to continued military operation. pic.twitter.com/BjXeEiAjLzFebruary 12, 2024
An Israeli military spokesman said the hostages were being held on the second floor of a building that was breached with explosives during the raid amid heavy exchanges of gunfire with surrounding buildings.
"We've been working a long time on this operation," Lt Col. Richard Hecht said. "We were waiting for the right conditions."
The Argentine government thanked Israel for the rescue of the two men, who it said were dual nationals. Video footage showed them hugging relatives in Israel's Sheba hospital, looking frail but relieved.
Israel's military said air strikes had coincided with the raid to allow its forces to be extracted.
Hassouna, displaced with his relatives from northern Gaza, said they were killed at least 4km  from the military operation.
More than 60 people have been killed and over 230 others injured in air strikes near Rafah. (EPA PHOTO)
"We have nothing to do with anything. Why did you bomb us?" he asked.
People in Rafah said two mosques and several residential buildings were hit in more than an hour of strikes by Israeli warplanes, tanks and ships which caused widespread panic.
Many Western leaders have expressed alarm at Israel's offensive while continuing to support the country.
However, a Dutch appeals court said it had blocked the export of F-35 fighter jets parts to Israel over a "clear risk of violations of international humanitarian law" in Gaza.
Israeli government spokeperson Eylon Levy said Israel was fighting to prevent "extremism and terrorism from spiralling further in Europe" and expected its allies to stand by it.
Britain urged Israel to agree to a truce to free its hostages rather than attack Rafah where people were trapped.
Foreign Secretary David Cameron said: "We think it is impossible to see how you can fight a war amongst these people. There's nowhere for them to go."
US President Joe Biden says Israel needs a credible evacuation plan. Israel's Levy called on UN aid agencies to help. "Work with us to find a way," he said.
