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A car bomb exploded outside a Sunni mosque in a Bahrain neighbourhood where the royal court is situated but caused no casualties, the interior ministry said.
The bomb, made from a gas cylinder, exploded late Wednesday in the parking area of the Isa bin Salman mosque in the Rifaa neighbourhood, south of the capital Manama, the ministry said.
"The terrorist act took place while prayers were held in the mosque," it said.
Government spokeswoman Samira Rajab said Thursday the explosion was "an attempt to create chaos" in Bahrain.
"This is a despicable terrorist act intended to undermine national unity and sow sectarian sedition," said Rajab.
The interior ministry announced it has banned a rally which was planned by the opposition for Friday in the Shiite villages of Khamis and Sar.
Legal action will be taken against violators, a ministry statement warned.
Witnesses said the blast site was close to the royal court of the Sunni dynasty that rules Shiite-majority Bahrain.
Militants from the disgruntled Shiite majority are usually blamed for unrest in the Gulf kingdom, where confrontations between police and Shiite protesters are frequent.
King Hamad issued a statement late Wednesday condemning the attack and ordering security forces to hunt the culprits and the "instigators".
"The people of Bahrain have had enough and have run out of patience over such acts that are strange to the people of Bahrain and their morals," he said.
The Shiite opposition, led by the influential Al-Wefaq bloc, condemned the blast, rejecting "any act intended to terrorise the innocent" and insisting on finding a "peaceful solution" to the kingdom's political impasse.
The latest bombing comes amid an escalation in attacks on police in Shiite villages, using homemade explosive devices and petrol bombs, according to authorities.
Last week, four policemen were wounded in a bombing outside the Shiite village of Janabiyah, just weeks after an explosion killed a policeman and wounded two others in the area of Sitra.
Protests remain frequent in Shiite villages despite a heavy-handed crackdown in March 2011 that quelled a month-long protest inspired by the Arab Spring uprisings.
At least 80 people have been killed in Bahrain since the protests erupted, according to the International Federation for Human Rights.