A hostage situation has developed at the Holey Artisan Bakery in Dhaka, Bangladesh. A group of heavily-armed gunmen has taken about twenty hostages, after killing at least one police officer in a battle fought with guns and grenades.

CNN reports that the U.S. Embassy in Dhaka issued a warning on Twitter, referring to the district where the cafe is located: “Reports of shooting and hostage situation in Gulshan 2, Dhaka. Please shelter in place and monitor news.”

The Holey Artisan Bakery is said to be “popular with expatriates, diplomats, and middle-class families” by the New York Times. According to the Times’ sources, some of the hostages are believed to be citizens of Western nations. The U.S. State Department said on Friday afternoon that all American citizens working for the U.S. mission in Dhaka were “safe and accounted for.”

The NYT report says that up to 10 police officers were wounded during the standoff, with local television stations broadcasting “footage of bloodied officers being carried on stretchers from the scene.”

CNN notes that a 52-year-old Hindu priest was hacked to death with machetes while gathering flowers this morning, the latest in a series of gruesome murders perpetrated by Muslim extremists.

It is not yet certain if the cafe assault is directly related to that murder, but eyewitnesses quoted by the New York Times reported hearing the attackers shouting “Allahu akbar!” (which the Times, of course, gingerly translates to “God is great!”) as they detonated crude explosive devices inside the cafe.

Both the Islamic State and Al Qaeda have been floated as potential culprits. The U.S. State Department just yesterday announced the designation of Al Qaeda’s regional wing, Al Qaeda in the Indian Subcontinent (AQIS), its own terrorist organization. The State Department notes the group’s involvement in numerous secular blogger murders:

AQIS has also claimed responsibility for the murders of activists and writers in Bangladesh, including that of U.S. citizen Avijit Roy, U.S. Embassy local employee Xulhaz Mannan, and of Bangladeshi nationals Oyasiqur Rahman Babu, Ahmed Rajib Haideer, and A.K.M. Shafiul Islam.

The Islamic State has also exerted significant effort through their propaganda outlets to recruit terrorists in the region. The April issue of Dabiq, the group’s English-language propaganda magazine, dedicated multiple features to the region they referred to as “Bengal.”

The BBC quotes police chief Benazir Ahmed describing the attackers as “derailed youths,” and saying that the police “want to resolve this peacefully,” because “our first priority is to save the lives of the people trapped inside.”

Another police officer told the BBC that “Islamic militants” were suspected as the perpetrators of the attack.

Lisa Daftari of Foreign Desk News reported that the hostages included an Argentine and an Italian. She also said local TV coverage of the hostage crisis had gone dark, “amidst reports police rapid action battalion ready to storm restaurant.”

Update, 3:45 PM Eastern: The Amaq News Agency, the media organization linked to ISIS, has claimed the Bangladesh attacks as “ISIS fighters.”

Update, 5:00 PM: Amaq is also claiming that the murder of the Hindu priest on Friday morning was the work of ISIS fighters.

A second Bangladeshi police officer has reportedly died from wounds suffered during battle with the terrorists. NBC News relays word from a police official that most of their casualties “occurred when one hostage escaped and as officers rushed to help him a grenade was tossed at them from a balcony.” One of the dead was the assistant police commissioner.

Update, 10:45 PM: After a standoff lasting several hours, a massive force described as over 100 commandos moved into the restaurant, leading to a fierce gun battle punctuated with explosions.

“Our commandos have stormed into the restaurant. Intense gunfighting on,” Rapid Action Battalion Force deputy director Rahman Bhuiyan told Reuters.

Reuters reports that ISIS has been posting photographs of what it says are foreign hostages killed during the assault. Some of the photos can be seen here. (Warning: graphic images at the link.)

The Islamic State has claimed 24 people were killed inside the cafe, but Bangladesh police dispute that claim.

Italy’s ambassador to Bangladesh said the assault on the cafe was a “suicide attack” by militants who wanted to “carry out a powerful and bloody operation,” so there is “no room for negotiation.” Seven Italians are reportedly among the hostages.

There are reports that about half a dozen people have been rescued alive from inside the cafe.