Secretary-General Kofi Annan called Thursday for an immediate halt to the escalating conflict between Israel and Lebanon's Hezbollah militia but said there were "serious obstacles to reaching a cease-fire."

Annan said Hezbollah's actions in launching rockets into Israel and abducting Israeli soldiers "hold an entire nation hostage" and set back prospects for Middle East peace.

But he also condemned Israel's "excessive use of force" and collective punishment of the Lebanese people, saying it had triggered a humanitarian crisis.

Click here to view a timeline of the current conflict.

"While Hezbollah's actions are deplorable, and Israel has a right to defend itself, the excessive use of force is to be condemned," he told the Security Council.

Israel must make "a far greater and more credible effort ... to protect civilians and civilian infrastructure," he said.

Annan said the number of civilians affected by the conflict is now at 500,000, but he added that likely could increase. He based that estimate on information provided by a three-member U.N. team that visited the region and his own contacts.

Annan said mission members reported that many of the people they spoke to in the region noted that "whatever damage Israel's operations may be doing to Hezbollah's military capabilities, they are doing little or nothing to decrease popular support for Hezbollah in Lebanon or the region, but are doing a great deal to weaken the government of Lebanon."

"In short, the very government which Israel wants to extend its control has itself become a hostage to the crisis and is less able than ever to deploy its forces" to southern Lebanon, which is controlled by Hezbollah, he said.

"Let me be frank with the council," Annan added. "The mission's assessment is that there are serious obstacles to reaching a cease-fire, or even to diminishing the violence quickly."

Israel's U.N. Ambassador Dan Gillerman told reporters immediately after Annan's speech that there would be no cease-fire.

"We will do whatever is necessary," he said. "We have no timeline."

Gillerman said he was "disturbed" that Annan's report never mentioned the word "terror" or referred to Syria and Iran, which Israel accuses of being Hezbollah's sponsors.

"The first thing that must be addressed is cessation of terror before we even talk about cessation of hostilities," Gillerman said.

"When you operate on a cancerous growth you do not stop in the middle, sew the patient up and tell him keep living with that growth until it kills you. You make sure it is totally removed."

U.S. Ambassador John Bolton said it was time for the Security Council to start considering a response.

"As we've said repeatedly, what we seek is a long-term cessation of hostilities that's part of a comprehensive change in the region and part of a real foundation for peace, but still no one has explained how you conduct a cease-fire with a group of terrorists," he said.

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