BEIRUT — An Israeli airstrike flattened a building near one of Beirut’s busiest traffic junctions Friday, shaking the Lebanese capital as Israel kept up its intensified bombardment even as diplomacy aimed at securing a cease-fire showed tentative signs of progress.

Pressing its offensive against the Iran-backed militant group, Israel has this week stepped up airstrikes against the Hezbollah-controlled southern suburbs — an escalation that has coincided with indications of movement in…