Al Qaeda-tied militants attack south Yemen village

ADEN, July 25 (Reuters) - Al Qaeda-linked militants attacked a village in south Yemen on Wednesday, fighting to regain control of territory for the first time since they were driven from their strongholds in a U.S.-backed army offensive last month.

The head of a local militia said his fighters had managed to repel the militants, killing two of them in clashes in the village of Batias in the province of Abyan, where armed Islamists established a foothold last year.

Wednesday's attack highlighted the enduring threat of Islamist militancy in Yemen and may alarm the United States and Saudi Arabia, who increasingly view the impoverished state as a front line in their war on al Qaeda and its affiliates.

Militants went on a rampage in Abyan last year, seizing several towns and imposing sharia (Islamic law) while then-President Ali Abdullah Saleh grappled with mass protests that that eventually toppled him.

Washington supported a Yemeni army campaign that was hailed as a major victory after the area was "liberated" from Islamist fighters in June. But residents and analysts say the militants are simply lying low and waiting for a chance to regroup.

Despite losing their territorial base, militants have since shown their clout remains formidable, assassinating a top southern military commander and killing 10 people in a suicide bombing at a police academy in the capital Sanaa.

On Tuesday, two militants were killed in the southeastern port city of Mukalla when an explosive device they were preparing to use against local security officials went off by accident, a local official said.