Fighting erupted yesterday between government forces and Islamic rebels holding 21 hostages in a guerrilla lair in the southern Philippines.
A local television station has reported that two foreign hostages were found dead after the clashes. However, a military spokesman said no independent confirmation of this report was available.
Officials said one soldier was killed and seven wounded. They said the fundamentalist Abu Sayyaf guerrillas suffered an undetermined number of casualties in the hour-long battle.
The fighting occurred 300 metres from where the hostages were being kept on Jolo Island, the chief government negotiator, Mr Nur Misuari, told reporters.
Mr Misuari, a former rebel himself, said he was assessing the situation before sending his emissaries back to resume talks with the guerrillas. "They're in a fighting mood, in a killer's mood, so it's very dangerous."
The hostages - 10 Malaysians, three Germans, two French nationals, two South Africans, two Finns, one Lebanese and a Filipina - have been held on Jolo since they were kidnapped from a Malaysian dive resort on Easter Sunday.
Jolo, 960 km south of Manila, is a stronghold of the Abu Sayyaf, one of two groups fighting for an Islamic state in the mostly Catholic country.
The gun battle broke out a day after a group of journalists saw the hostages, who pleaded for a quick end to their captivity and said they were hungry, sick and feared for their lives.
It also occurred hours after a caller to a local radio station who claimed to be one of the rebels said they would behead two foreign captives unless the troops were pulled back.
Some 2,000 troops have ringed the camp where the hostages are kept and the high tension has led to sporadic exchanges of fire with the rebels.
A military spokesman said the shooting started when some of the rebels tried to slip through the military encirclement.
The caller to a radio station in Zamboanga demanded a military pull-back and added: "Maybe we will surprise them with two heads tomorrow."
Yesterday's incident occurred after a failed military operation to rescue another group of hostages.
Last week, the military launched an assault on another Abu Sayyaf camp where 27 Filipino hostages, mostly schoolchildren, were kept after the rebels said they had beheaded two men among their captives. Troops took control of the camp on Basilan Island on Sunday after heavy fighting, but officials said the rebels had apparently escaped, taking away the captives.
In another setback for the government yesterday, intense fighting erupted between troops and the main Muslim rebel group in the south, the Moro Islamic Liberation Front.