Fierce fighting for control of Mozambique’s strategic northern town of Palma left beheaded bodies strewn in the streets, with heavily armed rebels battling army, police and a private military outfit in several locations.

Thousands were estimated to be missing from the town, which held about 70,000 people before the attack began last Wednesday.

The Islamic State group claimed responsibility for the attack, saying it was carried out by the Islamic State Central Africa Province.

Those who managed to escaped to Pemba have described the situation back at home as a massacre.

The militants, who cut telephone lines as they entered Palma, were aware it was a high-value target having attacked it last a year ago.

Palma is located close to a multibillion dollar gas-field development project at Afungi, run by the French energy company Total, the former fishing town has seen new hotels spring up to house foreign workers.