In addition, Hamas is believed to be holding two Israeli civilians who scaled a border fence and entered Gaza.
The Israeli military said one of its aircraft fired at two targets in the strip's northern area, describing one of them as "a vehicle that served a terrorist squad for launching arson balloons".
Al-Ayyam said that according to emails obtained by the US-based Foreign Policy journal, Jared Kushner, US President Donald Trump's son-in-law and senior advisor, seeks to push to close UNRWA and end the Palestinian refugee status.
The Fatah movement had warned Hamas of the danger of a unilateral conclusion of the armistice agreement with Israel in exchange for easing the blockade imposed on the Gaza strip.
Palestinian protesters gather as tear gas canisters are launched by Israeli forces during a demonstration at the Israel-Gaza border, in Khan Yunis in the southern Gaza Strip on August 3, 2018.
With borders to both Egypt and Israel largely sealed in recent years, Gaza suffers from desperately high rates of poverty and unemployment.
Critics say it amounts to collective punishment of the coastal territory's two million residents.
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They are in custody and will be put on flights home, a spokeswoman for the Israeli Immigration Authority said.
"The ship was monitored and was intercepted in accordance with global law", the military said in a statement, before the vessel, named Freedom for Gaza and carrying 12 people, was taken to the Israeli port of Ashdod.
The Palestinian Health Ministry has yet to issue a statement about casualties. In response to the protests, Israel on July 9 tightened the blockade by shuttering Gaza's main commercial terminal and limiting a Palestinian fishing zone off the enclave.
The Palestinians and the United Nations similarly dispute Israel's assertion that it ended its occupation of Gaza in 2005.
Freedom was the second boat of the "Freedom Flotilla" to be intercepted en route to "break the blockade" on Gaza, organizers said.
Fatah criticized "Hamas" for being involved in "shameful negotiations" with Israel, saying the deal aims "to separate Gaza from the homeland and establish a small state which would be the graveyard for our national project". Ten activists aboard were killed at the time.