– Yemen's U.S.-backed president quit Thursday under pressure from rebels holding him captive in his home, severely complicating American efforts to combat Al-Qaida's local franchise and raising fears that the Arab world's poorest country will fracture into mini-states.

Presidential officials said Abed Rabbo Mansour Hadi submitted his resignation to parliament rather than make further concessions to Shiite rebels, known as Houthis, who control the capital and are believed to be backed by Iran.

The prime minister and his cabinet also stepped down, making a thinly veiled reference to the Houthis' push at gunpoint for a greater share of power. Houthis deployed their fighters around parliament, which is due to discuss the situation on Sunday.

Yemeni law dictates that the parliament speaker — Yahia al-Rai, a close ally of former autocratic ruler Ali Abdullah Saleh — will now assume the presidency. Saleh still wields considerable power and is widely believed to be allied with the Houthis.

There were conflicting reports suggesting that authorities in Aden, the capital of Yemen's southern region, would no longer submit to the central government's authority. Even before the Houthis' recent ascendance, a powerful movement in southern Yemen was demanding autonomy or a return to the full independence the region enjoyed before 1990.

Concerns were also mounting about an economic collapse. Two-thirds of Yemen's residents need humanitarian aid, according to United Nations figures. Iran's rival Saudi Arabia, which has long been Yemen's economic lifeline, cut most of its aid to Yemen after the Houthis seized the capital in September.

The Houthis' recent encroachments on Sunni areas have also fanned fears of a sectarian conflict that could fuel support for Al-Qaida, a Sunni movement that has links to some of the country's tribes and is at war with both the Shiites and Hadi's forces. U.S. officials say the developments are already undermining military and intelligence operations against Al-Qaida's Yemen-based affiliate, which made its reach felt in this month's deadly Paris attacks.

Hadi's resignation comes four months after President Obama cited Yemen as a terrorism success story in a September speech outlining his strategy against the Islamic State in Iraq and the Levant, which involves targeted U.S. strikes on militants with the cooperation of a friendly ground force. Obama called it an approach "that we have successfully pursued in Yemen and Somalia for years."

State Department spokeswoman Jen Psaki said the U.S. was still trying to sort out what was happening on the ground and had made no decisions yet regarding embassy staffing.

The resignations mark the collapse of a transition that forced Saleh, who ruled for three decades, to resign in 2012. Hadi's rule was deeply undermined by Saleh loyalists who retained posts in state institutions and the security apparatus. Last year the U.N. Security Council imposed targeted sanctions on Saleh and two top Houthi leaders, accusing them of obstructing the political transition.

Some observers said Thursday's resignation of the elected president could encourage Yemenis to take to the streets just as they did in 2011 against Saleh.

"The coming hours will be decisive for Yemen for decades to come. Either they will usher in a new path, new openings, or we say our death prayers," said Yemeni writer Farea Al-Muslimi.