Bahrain's king has offered a national dialogue "with all parties" in a conciliatory move to resolve a crisis that has killed four people and wounded hundreds, rocking the key regional ally of the United States.

More than 60 people were in hospital on Saturday undergoing treatment for wounds sustained when Bahraini security forces fired on protesters as they headed to Pearl Square on Friday.

The shootings occurred on a day of mass mourning when Shi'ites buried the four people killed a day earlier in the police raid on the Pearl Square traffic circle.

In response to protests against his government that have drawn thousands of people on to the streets, King Hamad bin Isa al-Khalifa said late on Friday the crown price had been granted "all the powers to fulfil the hopes and aspirations of all gracious citizens from all sections" in the national dialogue.

U.S. President Barack Obama spoke with the king on Friday evening, condemning the violence and urging the government to show restraint. Obama said the stability of Bahrain, home to the U.S. Middle East fleet, depended upon respect for the rights of its people, according to the White House.

"This violence is exactly what the administration and the U.S. want to avoid," said Robert Danin, a Middle East expert at the U.S.-based Council on Foreign Relations think tank.

British Foreign Secretary William Hague said he was "alarmed" by reports of soldiers firing on protesters. "This is an extremely worrying development," he said in a statement.

The crown prince of the non-OPEC minor oil producer, Sheikh Salman bin Hamad al-Khalifa, appealed on TV for calm.

"Today is the time to sit down and hold a dialogue, not to fight," he said.

Bahrain's state media appeared to have adopted a softer tone after the conciliatory messages from the king and the crown prince, with TV commentators stressing the need for the Shi'ite and Sunni communities to overcome differences.

The unrest in the regional banking hub has shaken foreign confidence in the economy and investors will be looking for any signs that protesters will take the king's offer seriously.

In 1999, King Hamad enacted a constitution allowing elections for a parliament with some powers, but royals still dominate a cabinet led by the king's uncle -- premier for 40 years.

"I welcome the proposal of the king of Bahrain that the crown prince should initiate a dialogue between the different communities. Bahrain should take further steps on reforms that meet legitimate aspirations for greater social and political freedoms," Hague said.

Ali Ibrahim, deputy chief of medical staff at Salmaniya hospital, said 66 wounded had been admitted from the clash and that four were in a critical condition.

About 1,000 people gathered outside one hospital, some spilling into the corridors as casualties were brought in, including one with a bloody sheet over his head. Some men wept.

Shi'ite women in long black robes and nurses, chanted "Death to the Khalifas (royal family)." Hussein Makhtom said: "We are ready for a thousand of us to die for us to get our rights in Bahrain."

Fakhri Abdullah Rashed said he had seen soldiers shooting at protesters in Pearl Square. "I saw people shot in several parts of their body. It was live bullets," the protester added.

Offer rejected

Bahrain's main Shi'ite opposition bloc has rejected a dialogue call from the king after this week's unrest in the island, a Shi'ite ex-lawmaker said on Saturday.

"We don't feel there is a serious will for dialogue because the military is in the streets," Ibrahim Mattar, a member of the Wefaq bloc which quit parliament on Thursday, told Reuters.

Mattar said the authorities would have to "accept the concept of constitutional monarchy" and pull troops off the streets before any dialogue could begin.

"Then we can go for a temporary government of new faces that would not include the current interior or defence ministers," he said.

Jalal Firooz, an MP for Wefaq, the main Shi'ite bloc whose 17 members resigned from the 40-seat assembly on Thursday, said demonstrators had been holding a memorial for a protester killed earlier this week when riot police fired tear gas at them. Four people had been killed and 231 wounded when riot police raided the protest camp in the early hours of Thursday.

Friday's mourners then made for Pearl Square, where army troops opened fire, Firooz said.

Soldiers in tanks and armoured vehicles later took control of the square, which the mainly Shi'ite protesters had hoped to use as a base like Cairo's Tahrir Square, the heart of protests that toppled Egyptian President Hosni Mubarak on Feb. 11.

Reuters