They said three protesters and two members of security forces died when shooting broke out, while 10 protesters were wounded. South Yemen has seen a series of such incidents this year as southerners complain about marginalisation, but this was the first time Shabwa saw clashes.
Yemen, an impoverished country of 23 million, also faces a revolt by Shi’ite Muslims in the north while Saudi and Yemeni al Qaeda militants have regrouped on Yemeni soil and carried out attacks in the last two years.
In Sanaa, a group of 200 chanted slogans such as "No to the plot of Persian expansion" and "Yemen will remain free and independent" and called for the expulsion of Iran’s ambassador over alleged backing for the northern rebels.
Though the protest was organised by a non-governmental group, such events are unlikely to take place without official sanction.
Yemen accuses Iranian figures of funding the rebels known as the Houthis who have been locked in battle with government forces in north Yemen since August.
But the government has stopped short of accusing Iran’s government of backing them and Iran has denied any involvement.
The Houthis say they are fighting social, economic and religious marginalisation by the Sanaa authorities and accuse Sunni neighbour Saudi Arabia of backing the government.
Saudi Arabia launched an assault on the rebels earlier this month after the Houthis staged a cross-border incursion that killed two Saudi border guards.
Saudi Arabia, the world’s largest oil exporter, fears the growing instability in neighbouring Yemen could turn into a major security threat for the kingdom by allowing al Qaeda to re-launch operations there.
Global aid organisations have voiced deep concern at the escalation of the conflict in north Yemen, where the United Nations now says 175 000 people have been displaced by the fighting.
Pic: Yemen rebel