The Israeli army clarified early on Friday that its troops had not entered the Gaza Strip as it had earlier indicated, blaming an "internal communication" problem for the confusion.
Israel blamed an "internal communication" problem for the error - which briefly ignited fears of an Israeli invasion.
It said the money would be spent mainly on cross-border projects between Israel and the West Bank and Gaza, but might also include programs for Jews and Arabs living in Israel.
The United Nations said the Security Council would meet on Sunday to address the conflict, while the US Secretary of State Antony Blinken said Washington was "deeply concerned about the violence in the streets of Israel".
The seventh was a prosecutor and lawyer, who was seriously injured by Israeli soldiers during demonstrations in support of Gaza and Jerusalem in the northern West Bank city of Nablus and died later in a nearby medical center.
Israeli army spokesman Jonathan Conricus said he expected the fighting to intensify and, when asked about unconfirmed reports that Hamas might seek a ceasefire, said: "I don't think my commanders are aware, or particularly interested".
In Gaza City, people sifted through debris after an Israeli air strike destroyed a 12-storey building near the coast.
Defense Minister Benny Gantz ordered a "massive reinforcement" to suppress the internal unrest. Palestinians marked the first day of the Eid al-Fitr religious holiday under relentless aerial bombardment. Cairo was pushing for both sides to cease fire from midnight on Friday pending further negotiations, two Egyptian security sources said, with Egypt leaning on Hamas and others, including the United States, trying to reach an agreement with Israel.
An Israeli airstrike on a house near the Shati refugee camp in Gaza reportedly killed at least seven people early Saturday. Hamas said the tower block had been a residential building.
The Gaza Health Ministry said the toll from the fighting has risen to 119 killed, including 31 children and 19 women.
Hamas, the Islamist group that rules Gaza, launched the rocket attacks on Monday, in retaliation for Israeli police clashes with Palestinians near al-Aqsa Mosque, Islam's third holiest site, in East Jerusalem.
Red alert sirens signaling an air attack sounded in southern Israel, interrupting the funeral Friday of five-year-old Israeli boy Ido.
The two bitter enemies have plunged closer to all-out war.
Israeli planes bombed and destroyed the headquarters of the Hamas-run interior ministry in west Gaza City, the ministry spokesman said late on Friday.
The disturbances, in which riot police had repeatedly clashed with Palestinians, has been driven by anger over the looming evictions of Palestinian families from the Sheikh Jarrah neighbourhood of east Jerusalem. Violence has now spread to other regions where Jews and Arabs live side by side.
The Yediot Ahronoth newspaper reported that police arrested at least 30 people in Kafr Kanna, in the Galilee area in northern Israel.
Prime Minister Benjamin Netanyahu vowed to continue the operation, saying in a video statement that Israel would "extract a very heavy price from Hamas".
Global efforts to broker a ceasefire have so far failed, as Jewish and Arab mobs continue to clash in Israeli towns, despite Israel flooding the areas with security forces.
Netanyahu said on Thursday the campaign "will take more time". Hamas has also launched two drones that Israel said it quickly shot down.