UNITED NATIONS - UN Secretary-General Ban Ki- moon on Wednesday called on Israeli and Palestinian leaders to restore a political horizon, warning the region is facing "one of the most critical tests."

Addressing a press conference here on developments in the Middle East, Ban said he is "alarmed" by the new wave of violence that has engulfed Gaza, southern Israel and the West Bank, including East Jerusalem.

"Gaza is on a knife-edge," he said. "The deteriorating situation is leading to a downward spiral which could quickly get beyond anyone's control."

The UN chief firmly condemned the multiple rocket attacks launched from Gaza on Israel, stressing that such attacks are unacceptable and must stop.

He also urged Israeli Prime Minister Benjamin Netanyahu to exercise maximum restraint and to respect international obligations to protect civilians. "I condemn the rising number of civilian lives lost in Gaza," he noted.

Israeli war jets launched a large-scale offensive on the Gaza Strip on Tuesday with more than 100 air strikes on militant targets, killing 27 people and wounding 100 others.

The tensions along Israel's border with Gaza have escalated since the kidnapping of the three Israeli teenagers -- Eyal Yifrach, 19, Gil-Ad Sha'ar, 16, and Naftali Frankel, 16 -- on June 12. Israel blamed Hamas for their abduction and conducted a broad clampdown against the infrastructure of Hamas in the West Bank.

After the killing last week of Palestinian teenager Muhammad Abu Khdeir, street clashes between young Arab protesters and Israeli security forces flared in parts of East Jerusalem and in Arab towns across Israel, reports said.

Since Saturday Gaza militants have fired more than 300 rockets, projectiles and mortars from the Gaza Strip into Israel, according to various militants' group figures.

Updating on the troubling and volatile situation, Ban stressed that the killers must be brought to justice. He encouraged leaders on both sides to do their utmost to end all attacks, including provocations and attacks by Israeli settlers.

"Extremism in all its forms is fueling the cycle of violence," he said, adding "This is a time for justice, not for revenge. It is a time for statesmanship and wisdom."

The Secretary-General warned that the risk of violence expanding further still is real. "Gaza, and the region as a whole, cannot afford another full-blown war," he said.

"This is one of the most critical tests the region has faced in recent years," said the UN chief, calling on the international community to work with Israeli and Palestinian leaders to "restore a political horizon to avert further escalation."

The press conference came after Ban held dialogue earlier in the day with regional and world leaders, including Netanyahu and Palestinian President Mahmoud Abbas.

According to Ban, the leaders agreed on the urgency of the situation and the imperative to resume meaningful negotiations towards a viable two-state solution.

The UN chief stressed that the regional leaders have a vital role to play and urged them to help facilitate a return to the November 2012 ceasefire agreement.

"I know emotions are running very high," he said. "I urge all sides to exercise maximum restraint. Calm must be restored as soon as possible."

"The lives of countless innocent civilians and the peace process itself are in the balance," he stressed.