Australian hostages forced to hold up flag with Arabic writing

An apparent hostage situation was unfolding inside a chocolate shop and cafe in Australia's largest city on Monday, where several people could be seen through a window with their hands held in the air.

New South Wales state police said they were dealing with "an armed incident," though they would not confirm hostages were being held inside the Lindt Chocolat Cafe in Sydney. But television footage shot through the cafe's windows showed several people with their arms in the air and hands pressed against the glass.

"Specialist officers are attempting to make contact (with) those inside a cafe," police said in a statement.

TV footage showed two people inside the cafe holding up what appeared to be a black flag with white Arabic writing on it.

The Sydney Morning Herald reported a number of hostages were "being forced to hold an Islamic flag against the window shortly after the siege began at 9.45am."

Thousands of workers across the city have been sent home early and some of the city's major buildings evacuated. They include the Opera House, the State Library, Channel Seven, the NSW parliamentary executive offices, the NSW Supreme Court's criminal courts, the Downing Centre, and several city legal chambers.

An unknown number of staff and customers are being held at gunpoint inside the cafe.

Zain Ali, the head of the Islamic Studies Research Unit at the University of Auckland, said it was difficult to read the message because media images showed only the lower part of the flag. But he believed it was the Shahada, or declaration of faith, largely because a black flag with white writing in a contemporary context often contains that message. He said he could make out the word "Muhammad."

Ali said the Shahada translates as "There is no deity of worship except God (Allah), and Muhammad is the messenger of God." It is considered the first pillar of Islam's five pillars of faith, and has been used by groups like al-Qaida and Islamic State but wasn't invented by them, Ali said.

A police spokeswoman said no injuries had been reported from the incident. Heavily armed officers were lined up outside the cafe, and a man with a backpack inside the cafe could be seen walking back and forth in front of the glass doors.

Prime Minister Tony Abbott said the National Security Committee of Cabinet met to be briefed on the situation.

"This is obviously a deeply concerning incident but all Australians should be reassured that our law enforcement and security agencies are well trained and equipped and are responding in a thorough and professional manner," Abbott said in a statement.

The cafe is located in Martin Place, a plaza in the heart of the city's financial and shopping district that is packed with holiday shoppers this time of year. It is home to the state premier's office, the Reserve Bank of Australia, and the headquarters of two of the nation's largest banks. The state parliament house is a few blocks away.

Streets in the area were closed, offices evacuated and the public told to stay away.

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Associated Press writer Nick Perry in Wellington, New Zealand, contributed to this report.