* New clashes flare after days of violence
* Al Aqsa mosque compound a focal point of friction
* Israel marks 1967 capture of East Jerusalem (Adds Hamas ultimatum)
By Stephen Farrell and Jeffrey Heller
JERUSALEM, May 10 (Reuters) - Hamas gave Israel an ultimatum to stand down its forces at two Jerusalem flashpoints on Monday, raising the prospect of rocket attacks from Gaza after more than 300 Palestinians were hurt in clashes with Israeli police outside al Aqsa mosque.
There was no direct Israeli response to the threat by the militant Islamist group that controls the Gaza Strip. But Israel's military announced it was suspending for a day a major exercise, citing "possible escalation scenarios".
In Gaza, a Hamas spokesman said the leadership of a joint command of armed movements in the Palestinian enclave had given Israel "an ultimatum until 6 p.m. (1500 GMT)" to withdraw its security forces from the al Aqsa mosque compound and Jerusalem's Sheikh Jarrah neighbourhood.
Earlier, as Israel marked the anniversary of its capture of parts of Jerusalem in the 1967 Middle East war, police fired tear gas, stun grenades and rubber bullets at hundreds of Palestinians who hurled rocks at them at al Aqsa. The violence had died down by the time Hamas issued the ultimatum.
In Sheikh Jarrah, several Palestinian families face eviction, under Israeli court order, from homes claimed by Jewish settlers in a long-running legal case that has fuelled tensions in Jerusalem during the Muslim holy month of Ramadan.
The Palestinian Red Crescent Society said at least 305 Palestinians were injured, and 228 of them were taken to hospital, in the skirmishes at al Aqsa, situated in a compound holy to Muslims, Jews and Christians. It said several were in critical condition. Police said 21 officers were injured.
Recent clashes in Jerusalem have raised international concern about wider conflict, and the White House called on Israel to ensure calm during "Jerusalem Day".
In an effort to ease the situation, Israeli police banned Jewish groups from paying Jerusalem Day visits to the holy plaza that houses al-Aqsa.
The police also changed the route of a traditional Jerusalem Day march, in which thousands of Israeli flag-waving Jewish youth walk through the Old City. They entered through Jaffa Gate, bypassing the Damascus Gate outside the Muslim quarter, which has been a flashpoint in recent weeks.
Music played over loudspeakers in the area of central Jerusalem around Jaffa Gate, as marchers, singing and clapping walked in groups through streets sealed off by police.
"We are here to represent Jerusalem and the Jewish people in our capital and to show everyone that this is where we belong and this is where we are going to stay," said Manya Friedler Landau, 32, who was on the march with her flag-waving husband and four-year-old twin boys.
Israel views all of Jerusalem as its capital, including the eastern part that it annexed in a move that has not won international recognition. Palestinians want East Jerusalem to be the capital of a state they seek in the occupied West Bank and Gaza.
(Additional reporting by Nidal al-Mughrabi and Ali Sawafta)
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