Big Israeli armoured bulldozers, guarded by a stationary escort of tanks and armoured personnel carriers half-hidden in the adjacent sandbanks, were operating all along the exposed walk south on the Palestinian side of the hi-tech Erez terminal separating Gaza from Israel yesterday.

As the great and good of the Western and Arab worlds were gathering in Annapolis, this no-man's land crossed on foot by the small privileged minority of Palestinians allowed to enter and leave since Hamas's enforced takeover in June, has been extended to almost two kilometres.

Yesterday the road seemed like a metaphor for the ever- deepening isolation of Gaza. Much of it is now rutted by the bulldozers seemingly working to destroy the cover afforded to mortar and Qassam rocket-launching crews by the eerie, bombed-out wreckage of what was once a clatteringly busy Palestinian-Israeli industrial zone. The core of women from the nearby town of Beit Hanoun, brandishing familiar Palestinian flags, demonstrating against what is universally called here the "siege" of Gaza, had to do so separated even from the forbidding border fence by almost a mile-wide sterile zone controlled by the Israeli military, their remote-controlled drones buzzing overhead.

Just 75 minutes later at least one militant was killed in the area in an aerial strike on what the military said was a cell launching mortars. Another 15 minutes, and two more were killed by ground fire, this time, the military said, on a well-equipped Hamas unit trying to plant explosives by the vehicles.

The scene was a reminder that there may soon be a decision on whether to mount a full-scale military operation against Hamas inside Gaza – one some Israeli commentators have speculated was merely being postponed until Annapolis was out of the way.

Otherwise, Gazans were struggling yesterday to identify their hopes and fears with an Annapolis conference at which their own de facto Hamas government is not represented and much of whose immediate focus is on alleviating conditions in the West Bank. "What did Oslo do for us?" asked Sami Ayub, 40. "After 15 years of negotiations what are they going to be able to do in Annapolis in a single day?"

Mr Ayub was speaking at the Beit Lahiya cemetery, from which you could see the rising smoke and hear the thuds of perhaps four tank shells close to the northern border some two kilometres away, and where he and his four brothers have provided a full grave-digging and tomb-building service for the last bleakly busy seven years. But now, because of Israel's closure of the Karni cargo crossing, he has finally run out of the cement he needs even to cover the graves properly. Mr Ayub says that the desperate shortage of cement had already pushed the price of a sack up from around £2.50 to as much as £43. He has had to double the normal cost of his funeral service to £74. " At first people were very upset but now they understand. They have even brought concrete slabs from destroyed houses but that doesn't work. Now I don't know what I will do. The families will ask their Mufti if it is permitted to cover the bodies with sand."

Mr Ayub blames the Hamas takeover for the "siege," but adds that he feels "lost" between Hamas and the Ramallah-based government. " This has fallen on the head of the people," he said.

As if to rub home his point, Ahmad Shafi, head of the local farmers' co-operative, said last night he was now "very pessimistic" that Israel would implement its pre-Annapolis promise to release for export all of his members' highly perishable strawberry crop.

Neverthless, Mr Ayub added stoutly, he will be "following closely" today's proceedings in Annapolis on television. The unreal gulf between Gaza city and Annapolis was, if anything, heightened by the Hamas- promoted activists' conference in the very room in which President Bill Clinton had in 1998 attended the historic vote to take out references the elimination of Israel in the Palestinian National Charter. It was now decorated with banners proclaiming: "Our rights protected by resistance" and " Whoever gives up the Right of Return [for refugees] and Al Quds [Jerusalem] is not from us."

The Hamas hardliner Mahmoud Zahar told the conference: "The Land of Palestine ... is purely owned by the Palestinians. No person ... has the right to give up one inch of it."

Across the road in Tareq Abu Dayeh's "Chairman Arafat" souvenir shop, you could buy mugs commemorating "The Annapolis Conference for Peace" inscribed with an instruction "in the case of the conference's failure you are only asked to break this mug." Just 40 had so far been sold, said Mr Abu Dayeh. "People either say they have no money or they say 'what's the point of buying a mug I will have to break?'"