A Security Cabinet minister told Ynet on Tuesday evening that there was a consensus among the Israeli leadership on the need for a strong response to the renewed rocket fire.
It was unlikely, however, that far-reaching decisions are made in the immediate future, the minister said.
The minister also noted the negotiations might not be officially over.
"Last night there was a feeling the sides were close to (reaching) an agreement. Almost everything was done. And then Hamas decided to toughen its positions," the minister said.
"We have to wait a few days and hear the updates from the returning delegation. We have to also wait and see if this is a last-minute power play in negotiations, or a real desire from Hamas to escalate. This is yet unclear, so waiting is critical at this moment."
While the Israeli side was treading with cautious optimism, the head of the Hamas delegation to the talks, Izzat al-Rishq, said that "there's no use in extending the ceasefire," adding that the Palestinian delegation would depart from Cairo on Wednesday morning.
Earlier, he lowered expectations, saying "the chances of (reaching) an agreement are very low." Saying Israel has proven it does not wish to reach an agreement, he noted there was "no possibility in which the Palestinian delegation accepts a 'slimmed down' agreement."
Azzam al-Ahmad, head of the Palestinian delegation in Cairo, said that delegates had submitted an official proposal to Egypt outline a roadmap to calm in Gaza and was only waiting for a response from Israel.
"We haven't made any progress so far. The situation became complicated," al-Ahmad said.
"Judging by Netanyahu's most recent statements, he's still trying to force his conditions, and that's completely unacceptable," he added.
He noted there were a few hours left to go for the current ceasefire, following which the Palestinians will decide their next move.
Hamas spokesperson Fawzi Barhoum also accused Netanyahu for the failure of the talks in Cairo saying that, "It's up to him to be ready to pay the heavy price" for the collapse of the ceasefire talks.
Hamas spokesperson Sami Abu Zuhri said that the organization, "is interested in reaching an agreement, but there's no progress being made in peace talks and the Israeli attacks are meant to pressure the Palestinian envoy."
He placed the blame on Tuesday's escalation on Israel, saying "we have the right to respond."
Earlier, Palestinian sources claimed the crisis in talks was not a result of the rockets fired at Be'er Sheva. "The problem in the talks is fundamental," the sources said, noting that "the talks have reached a dead end."
"Some fundamental disagreements remain, mostly on the issue of the Gaza seaport, the sources said. "The Palestinian delegation demands the ceasefire agreement specifically states a seaport will be built in Gaza, but the discussion on the details would be postponed for later."
Israel refused, they said, and conditioned the seaport with the disarmament of the Palestinian factions, which brought the talks to a standstill.
"The efforts at the moment are solely focused on saving the negotiations from collapsing. The odds of reaching an agreement soon on a permanent ceasefire are very slim," the sources said.
An Israeli source, however, stressed the talks did not collapse over disagreements, but rather "because they fired and blew up the talks."
The rocket attack on Be'er Sheva came hours before a ceasefire deal was exepcted
to be signed in Cairo, but in wake of the attack Israel decided to recall its delegation, which was still in Egypt holding indirect talks with Hamas when rockets began to fall. The move seems to indicate that attempts at reaching a deal have collapsed. Palestinians for their part claim the IDF targeted Gaza before the rocket fire.
The two sides were close to reaching an agreement on Monday, but the Israeli delegation demanded corrections to the agreement at the last moment, causing the Palestinians to pull back from the talks.
Even before the rocket fire, the Associated Press quoted Hamas spokesman Fawzi Barhoum, who hinted of more rocket fire, saying: "If Netanyahu doesn't understand ... the language of politics in Cairo, we know how to make him understand."
On Tuesday morning, both sides were still in Cairo working to reach a long term deal
on Gaza after Israel announced it agreed to extend the temporary truce in Gaza for 24 hours while – at Egypt's request. Reports about the content of the agreement have been plentiful and rife with contractions.
A senior Hamas official who returned to Gaza from the negotiations in Cairo said they had been tough but expressed some optimism.
"There is still a real chance to clinch an agreement," Khalil al-Hayya told reporters, saying that it depended on Israel not "playing with language to void our demands".
"The Egyptian mediators are entering a good effort and we wish them success in this negotiation battle."
After more than a month of intense conflict, which killed over 2,000 Palestinians, many of them civilians, as well as 64 IDF soldiers and three civilians in Israel, there is little appetite on either side for a resumption of bloodshed.
Hamas and its allies want an end to the Israeli and Egyptian blockade on Gaza. But Israel and Egypt harbour deep security concerns about Hamas, the dominant Islamist group in the small, Mediterranean coastal enclave, complicating any deal on easing border restrictions.