Gunmen of the Shia Houthi Group attend a gathering as heavy clashes erupted between presidential guards and Houthi rebels in Sanaa on Monday. Reports state that Houthi rebels and Yemen’s presidential guards clashed near the palace of President Abd-Rabbu Mansour Hadi, few days after Houthi gunmen seized the president's chief of staff.

Reuters/Sanaa

The Yemeni army and Houthi fighters waged artillery and gunbattles near the presidential palace in Sanaa on Monday in the most intense clashes since the Shia Muslim movement took control of the capital in September.

Widely viewed as Iran's ally in its regional struggle for influence with Saudi Arabia, the Houthis - now part of the Yemeni government - said they would "escalate the situation" if their demands for a fair stake in a new constitution were not honoured.

The street battles marked a new low in the fortunes of the Arabian Peninsula state, plagued by tribal divisions, a separatist challenge in the south and a threat from the regional wing of Al-Qaeda, which claimed a deadly January 7 attack in Paris on a French satirical journal.

A senior leader of the Houthi group said a ceasefire agreement was reached shortly before noon and went into force. But residents said sounds of gunfire would still be heard near President Abd-Rabbu Mansour Hadi's residence.

The fighting began in the early morning, with gunfire and explosions reverberating across Sanaa and close to the presidential palace and the residence of the national security chief. It was not immediately clear whether Hadi was in the palace.

Residents said army gunners were shelling a housing compound used by as a Houthi base and smoke was rising from the compound.

Heavy gunfire and explosions shook Hadda district in the diplomatic quarter in Sanaa's south. A Reuters witness said he could see gunmen in Al-Khamseen street, home to some senior government security officials, including the defence minister.

Bazookas

"On my way to work in the morning in Hadda street, there were gunmen swarming everywhere. They were in military fatigues. Their bazookas bore 'Death to America, death to Israel' signs, which is the Houthis' sign," said a hotel worker.

State television said Hadi would meet advisers, including Houthi officials, in an attempt to bring the violence to an end.

The Houthis are demanding more rights for the country's Zaydi Shia sect and say they are campaigning against graft. They seized Sanaa in September and advanced into central and western regions of Yemen where Sunni Muslims predominate.

A deal signed later that month between political parties and the Houthis called for the formation of a new unity government followed by the withdrawal of Houthi combatants from the capital. The fighters have remained in place, however.

In an attempt to defuse the violence, Saleh al-Sammad, a Houthi member appointed by Hadi as a political adviser in September, issued a statement with a list of conditions addressed to the government.

The conditions include having a "fair" and inclusive partnership with Ansarallah, the political wing of the Houthi movement, and omitting sections of the draft constitution that violate September's political agreement.