By Nidal al-Mughrabi

RAFAH, Gaza Strip, Jan 29 (Reuters) - This was a bad week to be a Gaza smuggler.

When militants smashed open Gaza's border wall last week, many people in the Hamas-run enclave went on a shopping spree in Egypt -- bad news for the men who make fat profits smuggling goods made scarce by an Israeli-led blockade.

Dozens of underground tunnels crisscross the frontier between the Gaza Strip and Egypt, and tunnel operators make thousands of dollars per night by smuggling in everything from medicine to weapons, and even people.

Tunnel owner Abu Yassin said a customer cancelled a $150,000 job to smuggle 15 tonnes of medicine into the Gaza Strip on the night Hamas gunmen blasted open the border fence and shoppers streamed into Egypt. Since then, business has been dead.

"People bought all they needed by crossing the border in daylight and for free. We have had no business for a week," Abu Yassin told Reuters in the border town of Rafah, declining to give his full name.

Israel and the United States have been pressing Egypt to seal the tunnels to prevent militants, especially Hamas Islamists, from stockpiling weapons and longer range rockets to fire into Israel.

Despite the pressure, Abu Yassin said smugglers had dug out more tunnels since June, when Hamas seized control of the Gaza Strip and Israel tightened sanctions on the territory.

Some 1,000 Palestinians work in the smuggling industry and have dug around 200 tunnels along the border, Abu Yassin said.

"You need at least 30 or 40 people to work with you. It is a very risky job and a very profitable one, too," the 46-year-old said. "Weapons are as cheap and as easy to find as tomatoes in Gaza these days."

Tunnel cave-ins and accidents are commonplace.

Tunnellers said Hamas warned them to stop any work in the tunnels before militants blew up the fence last week.

Palestinian President Mahmoud Abbas wants to take control of Gaza's breached border with Egypt as part of a deal to sideline its Hamas rulers.

"If Rafah crossing would open properly for trade, I may quit tunnelling," Abu Yassin said.

But it is unclear how Abbas, leader of the Fatah faction, would be able to assert control at Rafah given opposition from Hamas, let alone convince Israel to open the crossing to commercial goods.

So for now, smugglers are poised to return to work.

"When the borders are sealed, we will get back to business," said Abu Mohammed, a 35-year-old smuggler who also asked not to be identified by his full name.

"Even if there is an agreement to re-open the crossing, there will still be items that can only enter through tunnels." (Editing by Dominic Evans)