Bahraini police on Sunday clashed with demonstrators trying to occupy Manama's banking center, as protests spread to the heart of the strategic Gulf state's business district.

Witnesses said police fired tear gas and rubber bullets at around 350 activists who had sealed off the Financial Harbor business complex with road blocks and a human chain.

Forces loyal to Libyan leader Moammar Gadhafi are "marching to cleanse the country" of insurgents, military spokesman Colonel Milad Hussein told a news conference on Sunday.

"Our raids are forcing the terrorists to flee. We have liberated Zawiyah, Uqayla, Ras Lanuf and Brega and the army is advancing to liberate the rest of the regions," he said.

Bahraini police on Sunday fired tear gas at protesters in Pearl Square for the first time since demonstrators began an anti-regime sit-in there last month, witnesses said.

Several protesters were hurt after inhaling tear gas fired by riot police from a bridge overlooking the square, but the security forces pulled out shortly after, witnesses said.

Two anti-regime protesters died in Yemen on Sunday, a day after police shot them in the head, a medic said, raising the death toll to seven from demonstrations against President Ali Abdullah Saleh.

The two succumbed to wounds after "being shot in the head" in the southern city of Aden, said the medic, adding four other demonstrators were in a critical condition after also being shot in the head.

Israel said Sunday it has okayed hundreds of new settler homes after a gruesome weekend attack in which five Israelis, three of them children, were murdered in their beds in the West Bank.

The ministerial committee for settlements, which met late on Saturday, approved construction of several hundred units across in Gush Etzion, Maale Adumim, Ariel and Kiryat Sefer, a statement from the bureau of Prime Minister Benjamin Netanyahu said.

The Arab League on Saturday urged the United Nations to slap a no-fly zone on Libya and said Moammar Gadhafi's regime had "lost legitimacy," in a boost for rebels fighting to unseat the strongman.

The pan-Arab organization also announced its recognition of the transitional national council set up by the rebels in their eastern stronghold of Benghazi and said they would open contact with the group.

The Arab League was to hold key talks on the conflict in member state Libya Saturday, predicted to back a no-fly zone over the country to ramp up the pressure on strongman Moammar Gadhafi.

Secretary General Amr Moussa called for a no-fly zone and said he wants the pan-Arab organization to play a role in imposing it, in an interview published Saturday.

Israeli troops were on Saturday hunting a suspected Palestinian who killed five members of an Israeli family at their West Bank settlement, officials and media reports said.

An Israeli army spokeswoman told AFP the killer had entered Itamar settlement near Nablus in the north of the West Bank and murdered five people overnight.

Yemeni police firing live rounds and tear gas killed one person and wounded many more Saturday in an attack on anti-regime protesters camping at a main square in the capital.

The dawn assault forced back demonstrators who had breached the limits of a concrete barrier put up by police at Sanaa's University Square, where protesters have been staging a sit-in for almost three weeks.

Libya decided on Friday to "suspend" diplomatic relations with France, Deputy Foreign Minister Khaled Kaaim said at a press conference.

The Libyan government has slammed what it called France's "illegal" decision on Thursday to recognize Libya's rebels and warned that the move could lead to a break in relations.