The disintegration of its unity deal with Fatah and the loss of its main supporters in the Arab world have also caused problems. The rapid escalation, while being portrayed as a response to Israel's actions, is actually an attempt by Hamas to regain some diplomatic stature and end its isolation.
As of Wednesday night, more than 300 Hamas missiles had been launched against Israel, many of them intercepted by the Iron Dome defence system, causing three minor casualties on the Israeli side. Israel's Air Force carried out nearly 600 strikes in Gaza. Thirty five Palestinians were killed, around half of them civilians.
For some in Israel this has been insufficient and there are calls both from the public and the government to change the objective of the operation and eradicate Hamas from Gaza.
The main advocate of this policy is Foreign Minister Avigdor Lieberman, who announced on Sunday that he was ending his party Yisrael Beiteinu's alliance with Likud, due to "fundamental" differences with Prime Minister Benjamin Netanyahu. Mr Lieberman's party will be remaining in the coalition for now.
Despite the calls for a more forceful operation against Gaza, Mr Netanyahu is not showing any inclination to launch a ground offensive similar to Operation Cast Lead in 2009. Neither is he under any pressure to do so from the IDF and defence establishment.
The government authorised the call-up of up to 40,000 reservists, but so far the IDF is planning to use only about a quarter of this number.While three brigade-size groups are being deployed near Gaza, this is not seen as a sufficient force for any major ground operation.
Hamas is going all out for a quick success. The organisation has tried to make PR capital from the fact that its missiles hit targets north of Tel Aviv, though they caused minimal damage and some were intercepted by the Iron Dome system.
The tunnel operation and an attempt to capture an Israeli soldier by Hamas frogmen, which were both foiled, were also seen as attempts by Hamas to create a "victory scene" which it would be able to present as an "achievement" to the Palestinian public before any ceasefire.
Hamas spokesmen said there would be no ceasefire if Israel did not accept its demands to open the crossings to Gaza and release its members who were arrested following the murder of three Israeli teenagers last month.
During a visit to IDF Southern Command on Wednesday, Mr Netanyahu said that "the operation will expand and continue until the missile launches on our cities stop and quiet returns. Hamas will pay a heavy price for firing on Israeli citizens".
It is difficult to predict an end to hostilities because the Egyptian government is hostile to Hamas and does not seem anxious, despite official statements, to try to broker a ceasefire.
Cairo identifies Hamas with the Muslim Brotherhood movement, which it has designated as a terror organisation. Last week, the director of Egypt's Intelligence Directorate, General Mohammed Al-Tuhami, visited Israel for meetings with his counterparts.
Following his visit, Israeli sources expressed the view that Egypt was not trying very hard to prevent escalation around Gaza and was content to see Hamas suffer for the next few days.
The expectation in Israel is that the Egyptians will eventually broker a ceasefire.
