Yemen's President Abed Rabbo Mansour Hadi on Wednesday was expected to yield to Yemeni rebels' demands as Shia Houthi fighters took control of the presidential palace and his private home in Sana'a after two days of fighting in the capital city.

Reuters reports:

A source close to the president said Hadi had met an official of the Shi'ite Muslim rebel group and would soon issue decrees resolving all differences. The source denied Hadi was under house arrest inside the residence, surrounded since early morning by Houthi fighters.

"Within hours, decisions will be made heeding the Houthi demands," said the source, speaking to Reuters on condition of anonymity before the official announcement. "We expect an announcement to resolve all problems within hours."

The rebels, who swept Sana'a four months ago, seizing state institutions and the city itself, on Wednesday forced most of Hadi's guards to flee from the palace but stopped short of overthrowing the president.

News of Hadi acceding to the rebels comes after violent face-offs with the military that left at least eight people dead on Monday and a televised speech by Houthi leader Abdel Malik al-Houthi Tuesday night, warning Hadi that if he failed to implement the group's political and economic reforms, "all necessary measures will be open" to enforce those changes.

The Houthis are calling for a role in Yemen's military and civil bodies, as well as changes to a draft constitution that would divide Yemen into six provinces.

Clashes between rebels and government forces have further imperiled a country that has been targeted by covert U.S.-led air strikes since at least 2002 as part of the continued fight against Al Qaeda in the Arab Peninsula (AQAP). The U.S. also sees Hadi as a close ally in its ISIS offensive.

Houthi rebels have accused him of protecting Yemen's corrupt politicians and civil servants and attempting to bypass a power-sharing deal brokered in September after rebels seized the capital city.

The Guardian explains:

Last September, after non-stop protests against rocketing fuel prices, rag-tag Houthi fighters took Sana’a, with its key ministries and other government buildings, and consolidated and expanded southward and along the Red Sea coast. That effectively killed off the troubled Gulf and internationally backed political transition process – which removed [former President Ali Abdullah] Saleh from office after four decades and temporarily avoided a Yemeni civil war, but failed to introduce more fundamental changes.

The New York Times also reports:

While the Houthis oppose Al Qaeda, they have vowed to curb American influence on Yemen’s government, which has cooperated for years with United States drone strikes against Qaeda leaders and their subordinates. ...

The Houthi advance on Tuesday, and its leader’s ultimatum, cemented the group’s status as Yemen’s most powerful opposition movement. And Mr. Hadi, the steward of an internationally backed political transition plan, appeared more sidelined than ever.

On Monday, al-Houthi gave his televised address against a banner that read, "The Revolution Continues."

"All the options are open and without exception and the ceiling is very, very high," al-Houthi said. "And this is why, I here advise the president [to] … Implement this deal. It is for your benefit and for the benefit of your people."

"We … will not hesitate to impose any necessary measures to implement the peace and partnership agreement," al-Houthi said.

April Longley Alley, a senior analyst with the International Crisis Group, told the New York Times that some of the Houthi demands were "quite legitimate."

As news of the Houthi's advances on Hadi's palace emerged on Wednesday, Human Rights Watch asked, "One important question is, should the Houthis take over Yemen’s government, do they fully understand their human rights obligations?"