Ministers from Hezbollah and its Lebanese allies resigned Wednesday, toppling the government of Prime Minister Saad al-Hariri before expected indictments against the Shi'ite group over the killing of Hariri's father.
Lebanese politicians had said Tuesday that Saudi Arabia and Syria failed to reach a deal to contain tensions over the U.N.-backed tribunal, which is expected to issue draft indictments soon over the 2005 assassination of Rafik al-Hariri.
The ministers resigned as Saad al-Hariri was meeting U.S. President Barack Obama in Washington.
The militant Shi'ite Hezbollah has denied any role in the killing. Its leader, Sayyed Hassan Nasrallah, has attacked the tribunal as an Israeli project and urged Hariri to renounce it. The Sunni Muslim premier has resisted Hezbollah's demand.
Clearing the way for the formation of a new government ... the ministers present their resignation, hoping that the president will quickly take the required steps for forming a new government, said Gebran Bassil, a Christian government minister speaking for Hezbollah and its allies.
Stalemate over the tribunal has crippled Hariri's 14-month-old unity government. The cabinet has met, briefly, just once in the last two months and the government could not secure parliamentary approval for the 2010 budget.
A U.S. official said Secretary of State Hillary Clinton had talked to officials in Egypt, Saudi Arabia and France, seeking international backing for the tribunal.
She's already been talking to the Egyptians, the Saudis, the French and others about having an international consensus about supporting Lebanon and ... the tribunal, a senior U.S. government official told reporters on Clinton's plane as it landed in the Gulf state of Qatar.
The official said Clinton planned to raise the Lebanon issue urgently with Gulf Arab leaders meeting there.
Tensions over the tribunal have exacerbated existing rifts between Hariri, who is supported by Western powers and Saudi Arabia, and Hezbollah, backed by Iran and Syria.
Analysts say the resignations could set the stage for protracted political turmoil in Lebanon, which has endured a series of crises since Rafik al-Hariri's killing, including assassinations and sectarian street fighting in Beirut in 2008.
You definitely have increased rhetoric, but whether that is matched by a slip towards a bad security situation is not pre-determined, said Karim Makdisi, a teacher of international relations at the American University of Beirut.
Bassil, the Christian government minister allied to Hezbollah, said Hariri had rejected demands for an urgent cabinet session to discuss Hezbollah's insistence that Lebanon withdraw all cooperation with the special tribunal.
The grace period has ended, and the waiting stage that we lived through without any result has ended, he told Reuters.
Tuesday, Hezbollah minister Mohammad Fneish accused the United States of obstructing attempts by Riyadh and Damascus to find a solution. There were Arab efforts that gave us the chance to work positively... These efforts have not worked because of American intervention, he said.
Political scientist Hilal Khashan said Washington had vetoed the Saudi-Syrian initiative and there was little prospect of a new government being formed quickly.
The Saudi-Syrian proposals were never spelt out by either country. According to a politician close to Hariri, they would have involved a Hezbollah pledge not to resort to violence if any of its members were indicted, while Hariri would ensure that any indictment was not exploited to Hezbollah's political detriment.
Khashan said Hezbollah was unlikely to repeat the events of May 2008, when gunmen took over Beirut in protest over government steps against the Shi'ite movement, but he did not rule out demonstrations.
The phenomenon of food riots is spreading in the Arab world, so the opposition may shield itself behind popular demands for combating inflation, he said.
Beirut's bourse fell 3.22 percent in response to the political turmoil, with shares in market heavyweight Solidere
, which has led the reconstruction of Beirut since the 1975-90 civil war, dropping as much as 8.0 percent.
(Because) the agreement between Saudi Arabia and Syria was blocked, we have seen a sell-off, said Louis Karam, senior investment adviser at Arab Finance Corporation.
But Marwan Barakat, head of research at Lebanon's Bank Audi, said that Lebanon's substantial foreign reserves and high levels of liquidity in the banking sector meant that it had a formidable defence line to protect its currency.