Strong blasts have rocked the town of Svatovo in southeastern Ukraine, after a storage facility housing 3,500 tons of ammunition caught fire, causing mass panic, evacuations, and ongoing struggles to contain the blaze. At least two people have been killed.

The continuous shell explosions make it difficult to deal with the blaze. Around 300 square meters of warehouses are on fire, according to a local official who said that the entire facility, located on Kiev-controlled territories, stores more than 3,500 tons of ammunition.

Ukraine’s Security Service (SBU) has reportedly classified the incident as an act of terror, local media reports, after the head of the Lugansk civil-military administration claimed that two shots from a "flare gun" had been fired at the facility.

“Shell fragments are bursting near the scene [of the explosion] right in the town, a shop building has been hit,” deputy head of the Lugansk administration, Yury Klimenko, told Ukraine’s 112 UA channel, adding that an emergency operations center had been established.

"A woman died – the clerk at a store – from shell fragments. Also, a man was killed. Four people were wounded,” local mayor Evgeniy Rybalko told Ukrainian TV channel, Hromadske TV, after the explosions started at around 8:00pm local time.

Rybalko also added that one of the Ukrainian servicemen remains trapped under the rubble. He is reportedly alive but there is no way to get to him as the warehouse is continuing to burn.

(Warning: Video contains strong language)

The explosions caused damaged to nine five-story residential buildings, six four-story buildings and twenty three-story housing units, according to Klimenko.

Authorities ordered the evacuations of some 20,000 people, with residents being taken in the direction of Kremennoi city and the village of Troitsky. However, some people have opted to seek shelter in the basements of their houses instead.

"It is very scary!" a woman living in Svatovo, Tatyana Verbitskaya told RT by phone. "I am inside the house, and my home has very thick walls, but the blast wave still hurts my ears," she said, adding that she was afraid that there would be casualties among those living closer to the warehouses.

"Roofs are blown off and windows shattered there," the woman said, wondering how the Kiev military got a permission to build ammunition storage facilities "so close to residential areas."

Videos have emerged online showing a massive fire and a bright red and orange glow over the area, with blasts echoing from far away.

"People are so scared ... when we were going into the basement, it could be seen that the fire was within the city territory," 112 UA's correspondent reported.

A spokesman from the presidential office confirmed that a special commission had been dispatched to the site of the accident to determine the cause of the explosion, TASS reported.

At the same time, Ukraine's presidential representative in the eastern Donbass region, Aleksandr Motuzyanik, told the channel that "locals were not in danger.” He added that Kiev military officials were working at the scene.