The Yemeni president on Tuesday dismissed the Cabinet including the prime minister who led it for two years, while partially reversing an earlier decision to lift fuel subsidies in a bid to end a standoff with Shiite rebels holding anti-government protests across the country.

Abed Rabbo Mansour Hadi made his decision during a meeting with the now outgoing government, representatives of political parties and parliament members, the official news agency SABA reported. The decisions came in response to an "initiative" submitted by a presidential committee formed by Hadi to examine peaceful resolutions for the Yemeni crisis.

"The nation is passing through tough times," the agency reported Hadi as saying during the meeting. "It is standing at a crossroads: either walk the path of life, development, and a new Yemen, or chaos, lawlessness and the unknown."

Hadi pledged to represent the interests of the Yemeni people as a whole and not privilege particular factions or groups. He said he would appoint a new prime minister within a week, after which political parties will nominate Cabinet ministers from their own ranks. Hadi will appoint defense, interior, finance and foreign ministers, SABA said.

Rebel spokesman Mohammed Abdel-Salam said his group rejected the move and would continue to pressure the government. "We are not giving in ... but we will also not shut the door to dialogue."

Faris al-Saqqaf, Hadi's political adviser, told The Associated Press the rebels, known as Hawthis, had surprised him by reacting in what he described as a harsh and swift manner.

"It shows that the Hawthis have other goals and are using the subsidies as a pretext to execute another agenda," he said. On Monday, Hadi alleged that there are "countries in the region that want to create chaos in Sanaa and burn it like Damascus and Baghdad are burning now" -- a thinly veiled reference to Iran, which he says supports Hawthis.

Hadi's decision comes a day after Hawthi rebel leader Abdel-Malek al-Hawthi escalated the confrontation with Hadi by calling for civil disobedience against the government. He also urged the expansion of mass protests that have disrupted life in the capital for over two weeks. The rebels had been demanding the government to step down and also reinstate fuel subsides.

Fuel prices nearly doubled after the subsidy cuts, but the reaction on the street was limited when it was announced in July. Opponents say the Hawthis are using the issue as a cover and really just want to seize power.

The Hawthis' ability to mobilize tens of thousands in the capital and set up sit-ins near several ministries has put security authorities on alert.

A senior Yemeni security official said that Hawthis are plotting a Ukrainian-style revolution in the capital and that they plan to storm the cabinet and parliament over the coming days.

The conflict between Hawthis and the government is rooted in enmity between the Shiite rebels and rival Sunni militias that are linked to the Muslim Brotherhood group and its political arm, the Islah party.

Hawthis recently defeated the Islamists after months of battle in the north, where they eventually took over the city of Amran. Critics view their current push on the government as an extension of that victory -- opportunism using the subsidies issue as a pretext.

The Islah party is part of the government. Critics saw outgoing Prime Minister Mohammed Salem Bassindwa as week and too close to the party. The change of the prime minister is the first since the election of Hadi in 2012.

The Hawthis waged a six-year insurgency that officially ended in 2010. The following year, an Arab Spring-inspired uprising shook the country, eventually forcing longtime President Ali Abdullah Saleh to step down as part of a U.S.-backed deal giving him immunity from prosecution.

Al-Hawthi said late Sunday a campaign of civil disobedience would begin Monday, "but it will not be about closing stores or groceries ... it will be a different kind." He didn't elaborate.

"If our demands are not met there will be decisive measures that we will talk about in time," he said.

Yemen, one of the Arab world's poorest nations, is facing multiple challenges. In addition to Hawthi rebels, an al-Qaida branch in the south poses a constant threat as it tries to impose control over cities and towns.

On Tuesday, al-Qaida militants shot three men dead in the southern province of Hadramawt, a security official said. Next to the bodies of the three men, he said, the militants left a statement describing them as "spies" for the United States who had been helping target al-Qaida militants for U.S. drone strikes.

"The spies sold their religion and themselves to the devil in return for money," the official quoted the statement as saying. "The Americans with their drones in the sky and those with their evil eyes on the ground," it added, warning others who cooperate with the U.S. that they would "face the same destiny."

The U.S. considers Yemen's local branch of al-Qaida to be the world's most dangerous, and has helped support Yemeni government offensives against it with drone strikes.