Israel's cabinet approved on Monday an Israeli inquiry into a deadly raid on a Gaza aid flotilla, responding to international demands for impartiality by putting two foreign observers on the panel.

The decision coincided with growing signs that Prime Minister Benjamin Netanyahu was poised, under world pressure, to ease the flow of goods into the Israeli-blockaded Gaza Strip, home to 1.5 million Palestinians and run by Hamas Islamists.

Middle East envoy Tony Blair said he hoped Israel would begin softening the blockade within days.

Angered by the killing by Israeli commandos of nine Turkish pro-Palestinian activists on May 31, Turkey said Israel's investigation would be biased and reiterated demands for a UN controlled probe. Hamas spoke of an Israeli cover-up.

Washington backed a UN Security Council statement that called for a "prompt, impartial, credible and transparent investigation conforming to international standards".

Palestinian President Mahmoud Abbas, on a visit to Paris, said the Israeli panel "does not correspond to what the Security Council asked for".

Netanyahu had consulted on the issue with the United States, which welcomed the Israeli inquiry. He did not appear to be in any political danger from a government-appointed inquiry, led by a former supreme court justice, with a narrow mandate.

Israel said its marines acted in self-defence in opening fire after a boarding party on the Turkish-flagged Mavi Marmara was attacked by activists wielding clubs and knives.

But the bloodshed during the raid to stop a six-ship aid flotilla from breaking the blockade raised an international outcry and pressure on Israel to lift an embargo that it says is necessary to limit arms smuggling to Hamas.

The International Committee of the Red Cross said the Gaza blockade violated the Geneva Conventions and should be lifted.

The US has called the situation in the Gaza Strip unsustainable, and moves by Netanyahu to revise the embargo could help to ensure him a warmer White House welcome during a visit he hopes to make later this month.

Washington, caught in a balancing act between Israel and Turkey, two key US allies in the Middle East, voiced confidence that Israel would conduct a fair investigation.

Turkey has withdrawn its ambassador from Israel, cancelled joint military exercises and called for the blockade to end.

Source: Reuters