Updated

Israeli President Shimon Peres said Tuesday that the killing of civilians by air raids on Gaza presents a moral dilemma, but argued there is scant alternative as long as the Islamic militants who rule the strip refuse to stop sustained rocket fire against Israel.

"There is a moral problem, but I don't have a moral answer to it," said Peres in an interview with the Associated Press. "If they are shooting at us, and don't let our mothers and their children ... have a full night's sleep, what can we do?"

A crusader for peace spending his last days in office justifying a war, Peres seemed downcast but also doggedly optimistic -- predicting Gaza's Hamas rulers will eventually accept a cease-fire because of Palestinians' suffering and their own isolation in the region.

Earlier Tuesday, Hamas rejected an Egyptian cease-fire proposal that had been accepted by Israel, and exchanges of rocket fire and airstrikes gained momentum through the day, resulting in the first Israeli fatality in nine days of fighting that have killed almost 200 Palestinians.

"I don't see it already finished," Peres said of the proposed truce. "I think there is a division among (Hamas). The situation in Gaza is demanding, terrible, tragic. And they cannot leave it hanging in the air. ... They see with their own eyes the cost of terror. ... Nobody will feed them for just shooting rockets. It's not a vocation, it's not an economy."

Peres also praised Palestinian leader Mahmoud Abbas, who controls the Western-backed government in the West Bank, as "a real and serious leader who is ready for peace -- and I do believe we can make peace with him."

In the hour-long interview the 1994 Nobel Peace laureate also bemoaned the state of the Arab world, beset by "terrorists who are destroying nation after nation without a vision."

"The damage that the terrorists did to the Arab world is unbelievable," he said. "Small groups of terrorists are making their own wish or their own vision or their own policy."

"Deep in their heart I'm sure many Arabs understand that their problem is not Israel. Israel is neither a problem nor a menace," he said.