An Israeli tank opened fire Saturday at the Hamas-ruled Gaza Strip in retaliation to an "explosive device" that wounded four soldiers along the border with the Palestinian enclave, the army said.
In response, the IDF used a tank to target an observation post in the area.
The Israeli military said it believed the Popular Resistance Committee in Gaza, an umbrella group of hard-line factions, planted the flag a day earlier during demonstrations in the area, Haaretz reported.
The four soldiers were taken to the hospital with burns and injures from shrapnel, two in serious condition.
The shots were fired at a Hamas facility located east of the city of Khan Yunis, according to Israeli media.
Tensions have been mounting along the Gaza-Israel border, as warnings by senior official signal that the possibility of a conflict between Israel and the Islamist group Hamas is becoming more likely.
Air sirens were heard in Israeli cities and towns nearby, but no rockets had been fired on Israel during that time.
"We will respond accordingly", he said.
Saturday's incident comes amid concern over the humanitarian situation in Gaza, which has for years been under Egyptian and Israeli blockade.
Local paramedics said no injuries were reported.
Israel's Prime Minister Benjamin Netanyahu responded to the explosion, vowing Israel "will respond appropriately".
Later in the evening, the IAF hit six Hamas targets in Gaza, including an attack tunnel and Hamas weapons factories, the army said.
"Hamas is responsible for the event and its ramifications, as well as for everything that occurs inside and outside Gaza, above and below the ground", the statement said.