It was the first major militant assault in Saudi Arabia since May and the first against a Western diplomatic mission.

The bloodshed in the Red Sea port city indicated that the fight against Saudi-born Osama bin Laden's al-Qaeda network in the world's biggest oil exporter is far from over.

The dead were said to be five non-US staff, four Saudi guards and three attackers.

The Interior Ministry said members of the "deviant" group -- which is what the government calls al-Qaeda -- threw explosives at the consulate gate and entered the compound in central Jeddah.

Some of the eight consulate staff wounded in the attack told Reuters that militants had tried to use them as human shields during a firefight with security forces.

"They held us hostage for an hour, an hour and a half. We were in two groups of about 4 and 8," said Muaffa Jilan Ibrahim, a Yemeni maintenance worker who had superficial bullet wounds.

"They told the security forces in front of us: 'We have hostages. If you approach, we will shoot'. They put us in front of them as human shields. The security forces stormed in and there was an exchange of fire," he said.

A US State Department official had earlier denied any hostages were taken.

Another consular employee, Indian national Richard Simon, whose head was grazed by a bullet, said he counted five gunmen.

He said he had taken refuge in the consulate's emergency "safe haven", which also came under attack.

"Afterwards three guys fired on the door, came inside and took four of us to another area and told us to sit down.

"Then some military people came, both sides were firing and we were in between. We were all on the ground and some people were injured," he said from his bed at King Fahd hospital.

US President George W. Bush said the attack showed "the terrorists are still on the move" and linked them to insurgents in Iraq, where violence threatens elections set for January.

"They want us to leave Saudi Arabia, they want us to leave Iraq, they want us to grow timid and weary in the face of their willingness to kill randomly, kill innocent people," Bush said.

US embassy spokeswoman Carol Kalin said five local staff, including a guard, were killed. She withheld their nationalities but security sources said they were Arabs and Asians.

Witnesses said the militants had hauled down the U.S. flag and burned it after bursting into the mission.

A Saudi security official said the militants entered the compound through a side door where mail is delivered, but the US official said at least some had used the main entrance.