Latest update to this story: Hostages held in Sydney cafe, forced to hold Islamic flag in window
[SYDNEY] Hostages were being held inside a central Sydney cafe where a black flag with white Arabic writing could be seen in the window, local television showed on Monday, raising fears of an attack linked to Islamic militants.
Australia, which is backing the United States and its escalating action against Islamic State in Syria and Iraq, is on high alert for attacks by radicalised Muslims or by home-grown fighters returning from fighting in the Middle East.
Part of Martin Place, home to the Reserve Bank of Australia, commercial banks and close to the New South Wales (NSW) state parliament, was closed off by armed police.
Live television footage showed patrons inside a cafe standing with their hands pressed against the windows. A black and white flag similar to those used by Islamic State militants in Iraq and Syria was also visible.
NSW Police tweeted: "A police operation is underway in Martin Place, Sydney's CBD. People are advised to avoid the area." Dozens of police including a SWAT team were setting up and a couple of hundred people were being held back by cordons.
Trains and buses were stopped and roads were blocked in the area, with train operators saying there had been a bomb threat at Martin Place.