Relentless pounding by Moammar Gadhafi's forces sent rebels fleeing a key oil hub Thursday, and a town near Tripoli was recaptured, as the Red Cross warned of escalating conflict in Libya that it termed a civil war.
As loyalists appeared to have wrested back the initiative on the battlefield, a source close to Nicolas Sarkozy said the French president will propose "targeted air strikes" in Libya.
And NATO chief Anders Fogh Rasmussen, who said "time is of the essence," affirmed that the alliance stands ready to act if there is a clear mandate.
With their fighters in retreat, the opposition appealed to Western powers meeting in Brussels to follow the lead of France, who on Thursday officially recognized their national council as Libya's "legitimate representative."
That brought a quick reaction from Tripoli, which suggested Paris was acting stupidly and said it could sever diplomatic relations.
Targeted by rocket fire, rebels fled from Ras Lanuf, a strategic coastal oil town in eastern Libya they had captured last Friday, Agence France Presse reporters said.
Their vehicles streamed eastward from the town after hours of heavy shelling and rocket attacks that swept from the western outskirts of Ras Lanuf to the east.
Other groups of rebels appeared to stay in town, but dejected fighters in the exodus said they had been defeated as rockets exploded and there was at least one air strike.
"We've been defeated. They are shelling and we are running away. That means that they're taking Ras Lanuf," said a rebel fighter, dressed in military fatigues who gave his name as Osama.
At least four rockets struck the center of town, prompting medics to evacuate the hospital, pack into ambulances with patients and speed away.
The only man left, Doctor Mahmoud Zubi stood beside the body of a man laid out on a stretcher, his nose and the top of his head blown away, and puddles of blood on the floor.
"We have evacuated the hospital. They were shelling us. It's only me here," the doctor told AFP.
"They're getting too close. Some of us are still there, but a lot of us are pulling out. They're getting too close," shouted one rebel.
Mahmoud Ibrahim, a rebel in his late teens, wept in one retreating truck, calling on U.S. President Barack Obama and British Prime Minister David Cameron to intervene.
"Where's Obama? Where's Cameron? Tell Obama to help us," he sobbed.
Fighting in eastern Libya has killed at least 400 people and wounded 2,000 since February 17, medics there said.
In the west, an intense battle for control of Zawiyah, a prosperous dormitory town 50 kilometers west of Tripoli, ended in victory for Gadhafi's forces on Wednesday night, a number of sources said on Thursday.
"The town is now under the army's control," said a resident by telephone.
"The fighting ended last night. Today the situation is calm. I'm taking the opportunity to leave the town with my family. I'm heading for Jedayem," he added, referring to a village three kilometers west.
The town had been under assault for several days by artillery and tanks.
Rebels had overrun Zawiyah, where many military officers have their homes, soon after a popular uprising erupted against Gadhafi on February 15.
Three BBC journalists who tried to reach Zawiyah earlier this week were "detained and beaten" before being subjected to a mock execution, the broadcaster said.
"This is yet another example of the horrific crimes being committed in Libya," a British Foreign Office spokesman said.
In Brussels, NATO and European Union were holding a series of meetings on Thursday and Friday to ponder military and economic options against Gadhafi.
The meetings of defense ministers, foreign ministers and prime ministers or presidents will shape the prospects for military intervention via a no-fly zone, humanitarian aid and economic props.
A source close to Sarkozy, who asked not to be named, said the French president will propose "striking an extremely limited number of points which are the source of the most deadly operations" by Gadhafi loyalists.
The three sites being considered are Gadhafi's Bab al-Azizia command headquarters in Tripoli, a military air base in Sirte, east of Tripoli and another in Sebha in the south, the source added.
The source said Sarkozy is also in favor of jamming loyalist communications systems.
The president's office declined to confirm the claim when contacted by AFP.
France has seized the initiative in pressure against Gadhafi and has been working with Britain to lobby for a United Nations Security Council resolution for a no-fly zone.
But anxious Washington wants any military action conducted under the banner of the North Atlantic Treaty Organization, with Arab regional backing seen there as essential.
For his part, NATO's Rasmussen said "if there is a demonstrable need, if we have a clear mandate and strong regional support, we stand ready to help.
The rebel national council, the Gulf Cooperation Council and the Organization of the Islamic Conference, a grouping of Muslim countries, have already called for a no-fly zone.
The alliance has stepped up surveillance of Libya's air space with radar-equipped aircraft, Rasmussen said.
"It does not mean we are deciding to consider carrying out specific operational steps today, but it does mean we are watching what the Libyan regime does to its people very closely indeed."
ICRC president Jakob Kellenberger said he was bracing for an escalation of of the conflict in Libya.
"We have to prepare for a further intensification of the fighting," he said in Geneva, adding that "I have no problem with the term civil war" to describe the conflict.
World oil prices fell back Thursday after spiking sharply higher on Middle East tensions a day earlier.
New York's main contract, light sweet crude for delivery in April, dropped 32 cents to $104.06 a barrel.
Brent North Sea crude for April shed 51 cents to $115.43
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