SYDNEY — Australian police said on Monday they are monitoring alleged demands made on social media by hostages being held in a siege at a Sydney cafe and the "situation is contained in one area".
Network 10 reported that two female hostages had called with claims from the gunman that two bombs were planted elsewhere in the city. Social media posts by alleged hostages claimed the gunman wanted to speak directly with Prime Minister Tony Abbott.
"That is forming a part of our tactical response in how to handle this," Deputy Police Commissioner Catherine Burn said of the reports, declining to comment on any demands from the hostage-taker. She said people should go about their business as normal in Sydney.
The hostage situation — feared linked to Islamic militants — erupted inside a chocolate shop and cafe in Australia's largest city Monday, with the nation's prime minister saying it may be "politically motivated."
New South Wales state police said the armed man was holding people in the Lindt Chocolat Cafe in central Sydney.
A black flag with white Arabic writing could be seen in the window of the cafes.
Hours after the incident first erupted inside the Cafe, New South Wales state Police Commissioner Andrew Scipione said police had not made direct contact with the gunman, did not know his motivation, and were not sure how many people were being held inside.
"We have not yet confirmed it is a terrorism-related event," Scipione said. "We're dealing with a hostage situation with an armed offender and we are dealing with it accordingly."
"We don't know whether this is politically motivated, although obviously there are some indications that it could be," Abbott told reporters in a news conference in the nation's capital, Canberra. "We have to appreciate that even in a society such as ours, there are people who would wish to do us harm."
Abbott who convened a meeting of the cabinet's national security committee for a briefing on what he called a hostage situation in Australia's commercial capital.
Australia, which is backing the United States and its escalating action against Islamic State in Syria and Iraq, is on high alert for attacks by radicalized Muslims or by home-grown fighters returning from the conflict in the Middle East.
Dozens of heavily armed police surrounded the in Martin Place, home to the Reserve Bank of Australia, commercial banks and close to the NSW state parliament.
Live television footage showed patrons inside the cafe standing with their hands pressed against the windows. A black and white flag similar to those used by Islamic State militants in Iraq and Syria was also visible.
NSW Police tweeted: "A police operation is underway in Martin Place, Sydney's CBD. People are advised to avoid the area."
A couple of hundred people were being held back by cordons and the fire brigade's hazardous unit was on the scene, a Reuters witness said.
Zain Ali, the head of the Islamic Studies Research Unit at the University of Auckland, said it was difficult to read the message on the flag in the cafe because media images showed only the lower part of it.
But he said it appeared to be the Shahada, or declaration of faith, largely because a black flag with white writing in a contemporary context often contains that message. He said he could make out the word "Muhammad."
Ali said the Shahada translates as "There is no deity of worship except God (Allah), and Muhammad is the messenger of God." It is considered the first pillar of Islam's five pillars of faith, and has been used by groups like al-Qaida and Islamic State but wasn't invented by them, Ali said.
The Reserve Bank of Australia, near the cafe, said staff had been locked down inside the building, and were all safe and accounted for.
Local media reported that the nearby Sydney Opera House had been evacuated after a suspicious package had been found. A staff member at the world-famous venue said she was still in the building but declined to comment further and police said they were still trying to confirm the incident.
Trains and buses were stopped and roads were blocked in the area, with train operators saying there had been a bomb threat at Martin Place.
Traders in currency markets said the hostage news may have contributed to a dip in the Australian dollar, which was already under pressure from global risk aversion as oil prices fell anew. The local currency was pinned at $0.8227, having hit its lowest since mid-2010 last week.
In September, Australian anti-terrorism police said they had thwarted an imminent threat to behead a random member of the public and days later, a teenager in Melbourne was shot dead after attacking two anti-terrorism officers with a knife.
Reuters and The Associated Press were used in this report.