BOUAFLE, Ivory Coast -- Explosions and gunfire shook a rebel-held city in a key cocoa region Monday, unsettling world markets for the product. West African mediators pushed for a truce to end the nearly monthlong conflict.

The fighting in the Daloa, a city of 160,000 that was captured Sunday in a major victory for rebels, drove frightened residents indoors. Ivory Coast President Laurent Gbagbo said government forces were retaking the city.

"I haven't seen any soldiers because I'm staying inside," one Daloa resident said by phone, too scared to give his name. "It's too dangerous to go out."

In the commercial center, Abidjan, mediators met late into the night Sunday with President Gbagbo and again Monday with his foreign minister to negotiate a peace plan.

"They are profoundly engaged," Cheikh Tidiane Gadio, the Foreign Minister of Senegal, said of the government. "They support our efforts."

But he said mediators were still waiting for approval from the rebels who have seized half the country since the uprising started with a bloody coup attempt Sept. 19.

Gadio said the insurgents agreed in principle to the proposal -- but warned mediators they would repel any attack. The insurgents claimed they captured Daloa in response to a government offensive north of the city.

Under the peace plan, rebels would confine themselves to barracks with their weapons, so peace talks could begin.

Gbagbo said his government accepted the proposals and that only details remained to be negotiated.

"This week we will finish this, either by signing or by making war. But we can't wait any longer than the end of this week," Gbagbo said in an interview on state radio.

Capturing Daloa was important for the rebels because it is the heartland of Gbagbo's Bete tribe as well as an important cocoa center.

Residents said the fighting in Daloa prevented farmers from harvesting cocoa, the main ingredient in chocolate.

News of the city's capture caused cocoa prices to rise on London and New York markets by $400 a ton, said Ann Prendergast, an analyst for Refco LLC in New York.

Ivory Coast produces more than 1 million tons of cocoa annually, or about 40 percent of the world's supply.

The rebels are centered around 750-800 ex-soldiers, many of them dismissed from the army for suspected disloyalty. Their nearly monthlong uprising has gathered support from Ivorians in the north, who complain that Ivory Coast's southern-based government treats them poorly.