Backers of beaten presidential candidate Mirhossein Mousavi will decide on Saturday whether to defy a stern warning by Iran's top authority and stage mass protests over a disputed election.

Iran's top legislative body holds an extraordinary session on Saturday morning to which it has invited Mousavi and the two other candidates who lost against President Mahmoud Ahmadinejad in the June 12 election, which Mousavi wants annulled.

Supreme Leader Ayatollah Ali Khamenei demanded an end to the rallies on Friday, issuing a strong warning to leaders of the street protests that they will be responsible for any bloodshed.

President Barack Obama condemned the violence carried out by security forces and believd Iranians should be free to protest, his spokesman said on Friday after Khamenei's speech, sharpening the White House's rhetoric over the post-election events.

Khamenei's words appeared to hint at a future crackdown by authorities on rallies. Khamenei said the election was fairly won by Ahmadinejad and not rigged, as Mousavi who wants the poll annulled has said.

Another defeated candidate, Mehdi Karoubi, called in an open letter to the Guardian Council legislative body for the election to be cancelled.

There was no immediate word from Mousavi's supporters whether they would still go ahead with a planned demonstration in downtown Tehran at around 4 p.m. (1130 GMT) on Saturday.

An ally of Mousavi said he was not calling on people to take to the streets again. 'Mousavi has no plans to hold a rally tomorrow or the day after tomorrow,' he told Reuters.

But his supporters may decide to show up anyway, as they did in their tens of thousands last Tuesday despite a call by Mousavi for them to stay home.

If they proceed in defiance of Khamenei's explicit warning, they risk a severe response from security forces, which have so far not tried to prevent Iran's most widespread street rallies since the 1979 Islamic revolution.

'If there is any bloodshed, leaders of the protests will be held directly responsible,' the white-bearded cleric told huge crowds thronging Tehran University for Friday prayers.

State media have reported seven or eight people killed in unrest since the election outcome was published on June 13, prompting Mousavi's supporters to hold mass rallies in Tehran, with demonstrations reported in several Iranian cities.

Scores of reformists have been arrested and authorities have cracked down on foreign and domestic media.

In a sign of defiance, Mousavi backers took to Tehran rooftops after nightfall on Friday to shout Allahu Akbar (God is greatest), an echo of tactics in the 1979 Islamic revolution.

'Something extraordinary'

Khamenei called for calm in his country, a major oil exporter embroiled in dispute with major powers over its nuclear programme which the West suspects could be used to make bombs.

Tehran says its nuclear work is peaceful.

He also attacked what he called interference by foreign powers who had questioned the result of the election.

Britain said it had summoned the Iranian ambassador to complain about Khamenei's speech, in which he also called the British 'the most treacherous' of Iran's enemies.

Asked about the call by Khamenei for street protests to end, White House spokesman Robert Gibbs said on Friday: 'He (Obama) believes that those who wish to have their voices heard should be able to do that without fear of violence.'

'I think you're ... witnessing something extraordinary ... I'm not sure that anybody even a week ago or so would have expected to see the courageous images that we're seeing now.'

Iran's national security council dismissed a complaint by Mousavi, in a letter to the Interior Ministry body earlier this week, about plaincl