Inspired by popular revolts in Tunisia and Egypt, the unrest in Bahrain, home to the U.S. Navy's Fifth Fleet, will alarm Saudi Arabia and the United States, which both see the island's al-Khalifa dynasty as a bulwark against Shi'ite Iran.

"I'm not saying that Bahrain is on the brink (but) should it become clear that the regime is in danger, the Saudis will step in," said Gala Riani, senior Middle East analyst at IHS Global Insight in London.

The Shi'ite bloc Wefaq, which holds 17 of parliament's 40 seats, planned to quit the assembly in protest. MP Ibrahim Mattar said his group and six others had demanded the government resign and make way for a new national unity cabinet.

Jane Kinninmont, an analyst at the Economist Intelligence Unit, said Wefaq was a cautious group trying to work within the system. "If they feel they can no longer do that then this is a sign of increasing polarization," she said.

"I assume there are divisions within the government ... (and that) the reformers are worried the crackdown has gone too far. Clearly these images of Bahrain are not going to be good for foreign investment," Kinninmont said.

The protesters want the Sunni ruling family to relinquish control over top government posts and address the grievances of Shi'ites over economic hardship, lack of political freedom and discrimination in jobs in public service and the military.