It intensified Israeli fears of growing Iranian influence in Lebanon that could lead to another Middle Eastern war.

“The Arab League Council at the ministerial level will hold an emergency session on Sunday to discuss the Lebanese crisis and how to deal with it,” the League said in a statement.

Hezbollah’s lightning takeover of large parts of mostly Sunni West Beirut, pro-government media outlets and the homes of some of the country’s most prominent politicians, marked a dramatic shift in the balance of power.

It leaves the western-backed government of Fouad Siniora, the prime minister, on the point of collapse and moderate Sunni leaders looking impotent. The country has been without a president since November.

Hezbollah is designated a terrorist organisation by Britain and America, but makes up the largest group in the Lebanese opposition. It is demanding the power of veto over any new government.

This week, President George W Bush will hold talks in Jerusalem with Israeli security chiefs.

US and Israeli defence experts are preparing to discuss ways to curb Iranian influence in Lebanon and the Gaza Strip through its “proxies” of Hezbollah and Hamas. They will also present intelligence about the threat of Iranian nuclear weapons development.

The Arab League meeting is a sign of the alarm in moderate Arab countries, such as Egypt and Saudi Arabia, at the sudden destabilisation of the Lebanese government and the increase in Iranian strength that this represents.

Yesterday gunmen opened fire on a funeral in a Sunni district of Beirut, killing two. The funeral was being held for a victim of the fighting. At least 24 people have been killed since the violence erupted on Wednesday.

Hezbollah’s decision to move into West Beirut was taken earlier this month after the visit of a high-ranking Iranian delegation to Beirut, according to security sources. The actual trigger was an announcement by the government that it was taking legal action against the group’s Iranian-made communications network. Hezbollah responded that the government had declared war.

Siniora went on television yesterday to call on the army, regarded as politically neutral, to restore law and order.

— Hezbollah announced last night that it will withdraw its gunmen from Beirut’s streets, after the army made a number of concessions. But the statement said its civil disobedience campaign would continue until all its demands are met.