A suspected bomb blast rocked the British embassy in Yemen yesterday, igniting fears that Westerners were being drawn into the Middle East conflict as it threatened to spiral into all-out war.

As intense diplomatic efforts to end violence between Israel and the Palestinians continued, a bomb was apparently thrown into the embassy compound in the Yemeni capital, San'a, causing substantial damage. No one was injured.

The blast came a day after a suicide attack on a US warship in the country's main port, Aden, that killed 17 Americans. Muhammad's Army, an extremist group previously known to be active only in Chechnya and Dagestan, claimed responsibility, warning that "strikes will continue until the Muslim land and Palestine are liberated".

Meanwhile, there were sporadic clashes across the Middle East but on a lesser scale than previous days - with only one reported death - prompting cautious optimism that the violence may have turned a corner.

An emergency summit at the resort of Sharm El Sheikh has been proposed by the Egyptians, though they insisted the conditions were still not yet right for full peace talks.

Foreign Secretary Robin Cook ended his two days of shuttle diplomacy around the region with a plea for peace, telling the warring sides: "Now is the time to stop."

Mr Cook separately met Palestinian leader Yasser Arafat and Israel's Prime Minister, Ehud Barak.

He said Mr Arafat had condemned Thursday's killings of Israeli soldiers and had ordered the arrests of those believed to be involved in it.

And he said Mr Barak said he was "very interested" in attending the proposed Egyptian summit.

Meanwhile, Prime Minister Tony Blair and other EU leaders urged their counterparts in the Middle East to "step back from the brink".

The cause of the explosion at the British Embassy in Yemen was unclear, with Mr Cook blaming a bomb flung over the wall, and Yemen's interior ministry suggesting a faulty electricity generator.

But a spokesman for the British Embassy in Yemen said: "We strongly suspect terrorist action."

In London, security was stepped up among the Jewish community amid fears the conflict could spread to the UK.

At the Central London Mosque, north-west London, police said about 300 Muslim protestors, angry over the Middle East crisis, burnt Israeli and United States flags. There were no arrests.

The London Stock Market closed 77 points up, completely recovering from early jitters blamed on the crisis that wiped £17bn off the value of shares at one point