SANAA, Nov 28 (Reuters) - Yemeni forces and Shi'ite rebels waged pitched battles on the outskirts of Saada on Saturday after regular troops thwarted an attempt by the insurgents to enter the northern city, a Yemeni military official said.

The army stopped the rebel advance on Friday and fighting was still taking place in the suburbs of the capital of the rebels' mountainous stronghold province, the official told Reuters.

A Saudi official said Saudi planes carried out renewed strikes in the Jabal Dukhan area on Friday, where rebels carried out a cross-border incursion earlier this month in which two Saudi border guards were killed.

Saudi Arabia, the world's largest oil exporter, fears growing instability in Yemen could turn into a major security threat for the kingdom by allowing al Qaeda to gain a stronger foothold in the poverty-stricken country.

The rebels said on their website Saudi air raids in an area outside Saada killed an unspecified number of civilians.

Aid organisations have expressed concern at the worsening conflict in north Yemen, where the United Nations says 175,000 people have been displaced by the fighting.

The rebels -- known as Houthis -- belong to the Zaidi sect of minority Shi'ite Islam, and complain of social, economic and religious marginalisation by Sanaa. Both the rebels and the Yemeni government deny their aims are sectarian.

Saudi media frequently mention an al Qaeda presence among the Houthis and Yemen sees Iran's hand behind the rebels. Iran denies involvement and has called for Yemen's government to end the fighting through negotiations.

Saudi Arabia, a U.S. ally which sees itself as the guardian of Sunni Islam, has been at odds with Shi'ite Iran since the 1979 Islamic revolution. (Reporting by Mohamed Ghobari; Writing by Firouz Sedarat; Editing by Andrew Dobbie) ((dubai.newsroom@thomsonreuters.com; +971 4 391 8301))

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