Yemeni ministers were holed up in Aden's presidential palace on Wednesday after separatist forces seized effective control of the southern port city, dealing another blow to the country's embattled government.
The United Nations agency for humanitarian affairs reported a "cautious calm" in the city, but damage to aid distribution channels and donor nation confidence had already been inflicted.
Kuwait's deputy foreign minister Khaled al-Jarallah said the infighting in Yemen's de facto capital had prompted his country to halt multi-million dollar development programmes.
In Aden, pro-separatist forces backed by the UAE known as the "security belt" fanned out across the city after three days of fighting that left 38 people dead.
The United Arab Emirates and Saudi Arabia have backed the beleaguered government of President Abedrabbo Mansour Hadi since intervening against Shia Houthi rebels in Yemen's civil war in March 2015.
But the Arab allies, whose military coalition was launched to roll back rebel gains and restore Yemen's "legitimate" government to power in Sanaa, have not intervened to prop up Hadi against his separatist rivals.
The coalition has instead urged the separatists to exercise restraint and called on the government to weigh up the demands of its rivals.
While Yemen's president resides in the Saudi capital, the power struggle in the anti-Houthi camp has left Prime Minister Ahmed bin Dagher and a number of senior government figures holed up in the Aden presidential palace.
A high-ranking military source said the separatists had also taken over bin Dagher's office chief overnight.
The UN Office for the Coordination of Humanitarian Affairs, or OCHA, said staff were able to work a half day Wednesday, citing a "cautious calm" after separatists seized most of the city from government loyalists.
"Some shops have re-opened in the city and civilians have been able to move out of their homes to stock up on essential supplies," it said, adding however that most schools remained closed and entry points for aid cut off.
"There are still no humanitarian flights or vessels into or out of Aden. The VOS Apollo is still anchored in international waters off the Aden coast," OCHA said.
At least 38 people have been killed and 222 wounded in Aden since Sunday, according to the International Committee of the Red Cross.
The UN earlier Wednesday raised alarm bells over the impact of the violent standoff on more than 40,000 Yemenis recently displaced to Aden, saying planned aid distributions had been postponed with cargo stuck at Aden port.
Since 2015, Aden had served as a refuge for tens of thousands of Yemenis fleeing conflict in their hometowns across the country, as the Saudi-backed government battled Houthi rebels allied with Iran.
Kuwait -- which according to its deputy foreign minister has pledged $100 million to UN aid agencies in Yemen and another $400 million through its own development fund -- has suspended its contributions in light of the recent fighting.
"What is happening in Aden is regrettable and painful," Khaled al-Jarallah told the Kuwait Chamber of Commerce and Industry.
"Meaningless and unjustified fighting will only worsen Yemen's wounds," he said, calling on all parties to restore calm.
Separatists, mainly based in Aden, have gained traction since April in their push for self-rule, accusing Hadi's government of corruption and demanding the reinstatement of South Yemen under a Southern Transitional Council.
In his first public appearance since the clashes erupted, STC chief Aidarouss al-Zoubeidi stressed the separatists were still fighting alongside the Arab military coalition, which has staunchly backed Hadi for three years against the Houthi rebels.
"We have warned this failure of a government time and again that the economic situation in the south in particular, and Yemen in general, was unbearable and that they had no choice but to heed the demands of the people of Aden, and of Yemen," Zoubeidi told France24 via satellite link.
He declined to confirm the STC had its sights set on forming its own government, saying: "the people of south Yemen have the right to determine their own future when the international community responds".
The clashes have sparked fears of a repeat of South Yemen's 1986 civil war, a failed socialist coup which killed thousands in just six days and helped pave the way for the 1991 unification of South and North Yemen.
The separatists, who enjoy popular support and are backed by some regular troops, rapidly gained control over all but one district in Aden since Sunday.
The UAE -- a pillar of the coalition -- has close ties to separatist leader Hani bin Breik while its "security belt" force backs the STC.
More than 9,200 Yemenis have been killed since the coalition intervened in the war three years ago, triggering what the UN has called the world's largest humanitarian disaster.
The coalition's original mission of rolling back Houthi gains has expanded to include fighting Islamist militant groups that have flourished during the war, and now keeping the peace between its allies on the ground.