SANAA - Yemen has cut fuel prices by around 15 percent, the state oil company said on Wednesday, rowing back on price rises that were introduced in July and triggered unrest led by Houthi tribesmen and armed clashes in the capital Sanaa.

The move came after an agreement brokered by UN envoy Jamal Benomar was signed earlier this week to end the fighting, which killed at least 200 people and saw Houthi tribesmen seize key government institutions in Sanaa. The state-owned Yemen oil company said the price of petrol and diesel had been reduced to 150 riyals ($0.69) per liter, down from 175 riyals now.

This was the second rowback from the July price hike, which had helped President Abd-Rabbu Mansour Hadi’s government secure a $560 million loan from the International Monetary Fund (IMF).

In July, a document circulated to petrol stations by the oil ministry and seen by Reuters announced a rise in the official price of petrol to 200 riyals per litre and diesel to 195 riyals. Meanwhile, President Abd-Rabbu Mansour Hadi has warned Yemenis their country is heading towards civil war after the takeover of the capital by rebels, a move that has allowed the insurgents to dictate terms to a weakened, fractured government.

“(The combat in Sanaa) emphasises to us the painful bitterness of fighting among our people and the danger of entering into a civil war,” Hadi said in a speech to political and security chiefs at his headquarters on Tuesday.

Any such war would likely pit the Houthi rebels, who claim to represent the Zaydi sect - 30 percent of Yemen’s 25 million people - against an alliance of  Islamist and tribal interests united by a few top families and generals.

The Houthis struck a deal that will make them a part of the government, but it’s not clear if that will satisfy their demands, or if it will instead embolden them to seek further powers.

Against the backdrop of a fragmented political, tribal and sectarian scene, any renewed fighting could also allow an array of other groups, including southern separatists, former leader Ali Abdullah Saleh and even al Qaeda to take advantage.

The state’s writ, weakened by a 2011 uprising that led the following year to the transfer of power from Saleh, now extends just a few miles from Hadi’s presidential palace, as heavily armed Houthi fighters guard the central bank and army bases it seized this week.

The main losers from the Houthi advance appeared to be Islamist party Islah and its leaders from the al-Ahmar family, which dominates a major tribal bloc, and military strongman General Ali Mohsen al-Ahmar, who is from a different clan.

His First Armoured Brigade was overrun by the Houthis when they entered Sanaa on Sunday, marking a serious reversal for the general, whose troops remained loyal to him instead of the government after Yemen’s uprising and transition of power. Despite a UN-mediated deal to stop four days of fighting on Sunday, the future depends very much on the Houthis’ next steps.

“Either they stick to the agreements and operate as a political movement, withdrawing from the city shortly,” said Yemeni analyst Hatem Bamehriz, “or they stay in Sanaa and from there enter into a civil war.”

After the 2011 uprising their demands for greater autonomy of northern areas were partly addressed, but they were left out of the transitional government and won over many of those disillusioned by Hadi’s faltering attempts to govern.

Hadi, a 69-year-old army general and Saleh’s soft-spoken and unremarkable deputy, inherited a nation in chaos: the economy was collapsing, al Qaeda repeatedly struck at the army, and separatist movements in both north and south festered.

His selection as interim leader under a transition plan backed by the UN and Arab neighbours in a 2012 referendum in which he was the only candidate lent tinder to a “people’s revolution” the Houthis now claim to have won by the gun.

The Houthis say their push into Sanaa was a victory for popular demands unanswered in the 2011 revolution, namely an end to corruption and relief for Yemen’s impoverished people.

When Hadi bowed this month to weeks of street protests by Houthi loyalists, firing his government and cutting back unpopular fuel price hikes, the rebels stood firm, leading critics to wonder whether their aim was a government takeover all along.

The Houthis’ ties to the Middle East’s foremost Iran, have also prompted comparisons in neighbouring Saudi Arabia between the rebel group and Lebanon’s Hezbollah.

What some now fear is that the overarching rivalry between Tehran and Riyadh could make Yemen the arena for a new proxy struggle in their region-wide tussle for power.

A big unknown factor is the role of former president Saleh, whose supporters remain powerful and who managed to maintain relative stability during much of his three decades of rule, a process he once likened to “dancing on the heads of snakes”.

Many Yemenis hold Saleh’s oppressive style and the graft that festered during his rule as responsible for many of the problems besetting the country today, but in a June interview with Reuters he described Hadi’s government as “failed”.

On Tuesday, Hadi appeared to accuse his predecessor of plotting with the Houthis to effect their takeover of Sanaa and force their way into a new government, referring to a conspiracy that “defies the imagination” staged by “former stakeholders”.

An aide to the president confirmed that reading of Hadi’s comments, saying: “The sudden collapse of the army does not reflect the power of the Houthi forces but reveals that the plot has been prepared very carefully,” the aide told Reuters on condition of anonymity.

Although Saleh’s government fought several wars with the Houthis, who accused him of marginalising northern areas and encouraging evangelism, they are both bitterly opposed to the Islah party and its backers.

Saleh split violently with General Ali Mohsen and the al-Ahmar family in 2011, both of whom backed the anti-government demonstrations. Street battles between the two sides threatened to bring the state to its knees, and their rift continues to plague the military.

Still, the former president, who remains the head of his party, has largely remained silent on the Houthi advances. His supporters joined anti-government sit-ins during recent weeks, leading critics to infer a secret pact with the rebels.

An official in Saleh’s party told Reuters this month that such talk was nonsense and the president’s backers favoured dialogue and the peaceful achievement of popular demands.

But the official suggested that rivalry with Ali Mohsen, criticised for his historic backing of militant groups, burned harder than contempt for the Houthis.

“Everyone knows who is behind the terrorist elements against the armed forces and innocent citizens in Hadramawt, Sanaa, Marib and al-Jawf,” the official said, apparently indicating Islah and citing areas where al Qaeda carries out attacks.