JERUSALEM: Three Israeli hostages killed mistakenly in Gaza by Israeli forces had been holding up a white flag, according to an initial inquiry into the incident, a military official said on Saturday.

The incident happened in an area of intense combat where Hamas militants operate in civilian attire and use deception tactics, the official said. A soldier saw the hostages emerging tens of meters from Israeli forces in the area of Shejaiya, the official said.

"They're all without shirts and they have a stick with a white cloth on it. The soldier feels threatened and opens fire. He declares that they're terrorists, they (forces) open fire, and two are killed immediately," said the military official. The third hostage was wounded and retreated into a nearby building where he called for help in Hebrew, the official said.

"Immediately the battalion commander issues a ceasefire order, but again there's another burst of fire towards the third figure and he also dies," said the official. "This was against our rules of engagement," he added. The military on Friday identified the three hostages as Yotam Haim and Alon Shamriz, abducted from Kibbutz Kfar Aza, and Samer Talalka, abducted from nearby Kibbutz Nir Am, all kidnapped by Hamas on Oct. 7.