SANAA (Reuters) - Government forces reported more than 100 rebels killed in fighting on Sunday, among them two Shia Muslim leaders, as battles in north Yemen intensified two days after the government urged a ceasefire. Yemen, an impoverished state of some 23 million people on the tip of the Arabian Peninsula, is battling Al-Qaeda militants and secessionist discontent in the south, as well as the rebellion in the mountainous north bordering Saudi Arabia. There has been a discovery of 100 bodies belonging to Houthi rebels on the sides of the roads outside Haraf Sufyian, according to a government statement released to the media. It seems these are members who had attempted to escape from the fierce fighting in Sufyan city and were chased down. The government said the two rebel leaders, named as Mohsen Hadi al-Qaoud and Saleh Jarman, were killed in the Haraf Sufyan area of Amran province and that others were arrested. The rebels, referred to by the government as Houthis after the tribal name of their leader, did not confirm the report. The rebels said in a statement Yemeni planes bombed a commercial district near Saada city. A military source said the raid targeted a petrol station used to supply the rebels. On Friday the government reiterated ceasefire conditions to the rebels, who rejected the proposal last week. President Ali Abdullah Saleh said the government would face this sedition in a decisive way if rebels rejected peace. Yemeni forces have used air strikes, tanks and artillery in the offensive described by officials as an attempt to crush the revolt, led by Abdul-Malik al-Houthi. The US embassy in Sanaa issued a statement urging both parties to return to a ceasefire agreement reached last year, and demanding both parties ensure security of relief workers and the safe passage of emergency relief supplies to camps housing internally displaced persons.