MANAMA (Reuters) - Sectarian clashes broke out at a Bahrain school Thursday, fuelling fears a planned march on the royal court Friday could inflame the Gulf island where a majority of citizens is Shi'ite but the ruling family is Sunni.
Bahrain, home to the U.S. Navy's Fifth Fleet, has been gripped by the worst unrest since the 1990s since protesters took to the streets last month, inspired by uprisings that unseated entrenched rulers in Egypt and Tunisia.
Seven people have been killed in clashes with security forces and thousands of the February 14 youth movement still occupy Pearl roundabout, but the opposition is increasingly split.
Moderate opposition leaders urged hardliners to cancel Friday's march, warning it could spark clashes between Shi'ites protesting against the government and Sunnis who support it.
Moderates led by the largest Shi'ite party Wefaq are calling for constitutional reforms and have called a less provocative rally Friday that is expected to draw tens of thousands.
One faction of the youth movement urged Wefaq and top Shi'ite cleric Sheikh Issa Qassim to help them stop hardliners from "inciting our youths on the roundabout to hold a march at three o'clock tomorrow to the royal court in Riffa to cause strife and the fall of innocent victims in the people's ranks."
Another faction later said the march would go ahead.
"It has become clear that the al-Khalifa regime and their cohorts do not value the blood of the natives of this land as much as they value their monopolization of power, whilst stealing the wealth of the people and repressing and depriving citizens of their basic rights," it said in a statement.
The march on the king's palace would go through the Riffa area, where Sunnis and members of the royal family live, risking the first direct confrontation between protesters and royals.
No more than a few hundred are expected to join the march, but politicians and activists on all sides expect Sunni civilians to come out to block their advance.
"Tomorrow will be a tough day," said a political source, who declined to give his name. "If they make the journey they will be met by plainclothes people and not security forces... These protesters are trying to derail the political process because in an election they could not win a seat if they tried."
The coalition of much smaller Shi'ite parties behind the march on the royal court are calling for the overthrow of the monarchy and the establishment of a republic -- demands that have terrified Sunnis who fear this would play into the hands of the oil-producing Gulf's main Shi'ite power, non-Arab Iran.
Protests in Bahrain have been peaceful since the initial clashes, but there have been repeated incidents of fighting between Sunni and Shi'ite residents since.
Thursday, witnesses said fighting broke out at a school in the town of Sar, where both Shi'ites and Sunni live, when some Shi'ite pupils launched anti-government protests.
They said parents from naturalized families -- Sunnis mainly from Syria and Pakistan who hold Bahraini passports -- came to the school. Shi'ite parents later arrived and clashes erupted.
Shi'ites say they are excluded from jobs in the security forces and view Bahrain's practice of settling Sunni foreigners serving in police as an attempt by its Sunni rulers to change the sectarian balance, an accusation the government denies.
"During the break we went on a peaceful protest, we gathered, a few girls. Next thing we know a group of naturalized people were let into school and the school door was locked, they had iron and wooden sticks and knives," said one student.
Fellow Gulf Arab oil producers Thursday announced a $20 billion aid package for Bahrain and Oman, both of which are facing anti-government protests.
Bahrain's Sheikh Khaled bin Ahmed al-Khalifa referred to tensions as he announced the aid package on Twitter: "Dear Bahraini ... messages of unity, brotherhood and social harmony are our most powerful weapons to fight sectarian strife."
In a statement from the foreign minister of the United Arab Emirates, the Gulf Cooperation Council also said it supported the Bahraini crown prince's call for dialogue.
"We expect all Bahrainis will be willing to support this approach." said Sheikh Abdullah bin Zayed al-Nahayan.
Direct dialogue has yet to begin between the Crown Prince and the opposition, which has called for assurances of concrete and wide-ranging reforms before they enter into talks.
(Additional reporting by Warda Al-Jawahiry; editing by Philippa Fletcher)