NYT report seems to have left this part out...they were unarmed and waving a white flag on a stick at the time.
The reality is that this is representative of the de facto rules of engagement implemented by the IDF. Just caught up some Sons of the Light insteads of the Sons of Darkness this time.
Haaretz
According to the investigation, a soldier who was stationed on one of the upper floors of a building in the area has identified three figures who held a long stick that had a white fabric attached to it.
The report states that, for some reason, the soldier felt threatened and opened fire on the group. Two hostages were hit and fell to the ground, and the third managed to escape into a nearby building.
At the same time, the soldier reported to his commanding officer that he had encountered who he had believed were Hamas members. The commander then arrived at the scene, while another IDF squad that was nearby followed the third hostage, who managed to escape into a hiding place inside the building.
The report says that as the soldiers approached the building, they began to hear shouts in Hebrew, asking for their help. The Israeli hostage who was hiding inside the building came out and ran inside again. According to the soldiers, they believed that it was a Hamas member who was trying to "pull them" into a trap. They proceeded to enter the building, where they killed the hostage.