Britain is seeking to amend the EU arms embargo on Syria to press Bashar al-Assad into holding peace talks with the rebels because the escalating conflict is threatening a regional "catastrophe", William Hague warned on Monday.

Speaking as combat raged around the strategic town of Qusair, where Lebanese Hezbollah miltiamen are now fighting alongside Syrian troops, the foreign secretary said the case for amending the embargo was "compelling". Weapons would be supplied only "under carefully controlled circumstances" and with clear commitments from the opposition, he told MPs.

The UK aim was to support a recent US-Russian call for talks between Assad and the rebels, though neither side has yet shown any readiness to attend.

"We must make clear that if the regime does not negotiate seriously at the Geneva conference, no option is off the table," Hague said. "We have to be open to every way of strengthening moderates and saving lives rather than the current trajectory of extremism and murder."

The US secretary of state, John Kerry, this week holds talks with the Sultan of Oman before going to Jordan to discuss with 10 of America's closest European and Arab partners how to advance a political transition.

On the ground, meanwhile, Syrian and Hezbollah forces on Monday pushed deep into the border town of Qusair after a ferocious artillery and mortar barrage that is thought to have killed more than 50 residents and laid bare the Lebanese militia's direct support for the Assad regime.

The battle for the town, which marks the first time in the Syrian civil war, or anywhere else, that Sunni al-Qaida and Shia Hezbollah have fought a direct and large-scale engagement, is believed to be edging in favour of loyalist forces who had hammered rebel-held areas with overwhelming firepower before launching a much-awaited advance on Saturday.

"We have lost civilians and fighters," aid worker Murhaf Baker told the Guardian. "The density of the shooting was completely mad. I have not seen such a thing all my life. The shooting did not stop for a single minute. Now the city is completely cordoned off by Hezbollah and the Syrian army – it is impossible to reach people there to give them food."

Rebels in Qusair have vowed to withstand the advance of Hezbollah from the Lebanese border to the south and Syrian troops from the north.

Qusair-based rebels are mainly a homegrown mix of civilians and army defectors. However, Jabhat al-Nusra, a group with links to al-Qaida, has gained in both prominence and numbers in recent months and is believed to be leading the defence of the southern outskirts, where it is clashing directly with Hezbollah.

Members of the two groups have fought sporadically in other parts of the country over the past two years, often unknowingly. But the current confrontation breaks new ground in the conflict and underlines the sectarian element in Syria's war. President Assad is from the minority Alawite sect, an offshoot of Shia Islam. Activists in Qusair, which lies at a crucial junction between Damascus and Homs, suggested up to 30 Hezbollah members may have been killed and dozens more injured. Those figures are impossible to verify.

What is clear is that Hezbollah's prominent role marks yet another escalation in a crisis that continues to alarm the region and force a mass exodus of Syrian citizens into neighbouring states.

Hezbollah, whose raison d'etre is ostensibly resistance against Israel, has shifted focus as the civil war has intensified. The group owes much to the strategic depth provided to it by the Assad regime, which offers a supply run, weapons depots and a refuge for key figures.

Iran, the key patron of both groups, is also heavily invested. Hezbollah, over the past year in particular, has tried to condition its followers to the fact that it is fighting a war in a neighbouring Arab state, rather than the Israeli military.

"It isn't even a secret any more," said one 25-year-old resident of a Hezbollah enclave in Daheyah, who refused to be named. "There are dozens of martyrs coming home. I know of at least four myself. People are talking about it openly." If opposition groups are ousted from Qusair, loyalist forces will have control of a supply line from Damascus to Syria's third city, Homs, which would allow the regime to consolidate in a part of the country it regards as a strategic corridor. Its core support bases in the nearby Alawite hinterland, which runs from near Homs towards Latakia and Tartus on the Mediterranean coast, have been exposed at times by rebel gains in the area. A regime victory would also offer it an uncontested link to the northern Bekaa, where Hezbollah and surrounding Shia villages can offer ongoing support to loyalist forces.

"With every week that passes we are coming closer to the collapse of Syria and a regional catastrophe, with the lives of tens of thousands more Syrians at stake," said Hague.

Hague also revealed that 70-100 jihadis with UK links have been in Syria, part of a trend of radicalisation that has alarmed EU governments and fuelled a controversial debate over supplying arms to the rebels.

Additional reporting by Mona Mahmoud