By Andrew Cawthorne

MEKELE, Ethiopia, Mar 8 (Reuters) Britain said today it was ''narrowing options'' in the hunt for five people linked to its embassy in Ethiopia who were kidnapped a week ago in one of the world's most inhospitable corners.

But as friends and family held vigils for their safety, and speculation mounted of a possible rescue operation, there was little concrete information about the hostages' condition or the identity and intentions of their armed abductors.

''We are narrowing our options, but obviously I can't give details,'' a Foreign Office spokeswoman in Ethiopia said.

British media reports have repeatedly said that Britain's elite Special Air Service (SAS) was readying an operation to rescue the hostages.

''Rescue missions are only used as a last resort. We try to resolve these things peacefully, but we have to make prudent plans,'' the spokeswoman said.

Britain does not comment on its special forces operations, but the SAS and other elite units are known to have soldiers trained in hostage rescue.

Ethiopia's state news agency repeated accusations from local officials that the five expatriates and eight Ethiopians with them were marched across the border to Eritrea by the 30-strong band who seized them during a tour of the remote Afar region.

Asmara has denied any involvement and that the hostages are in its territory. The two Horn of Africa nations still have bitter relations over a 1998-2000 border war.

British diplomats would not confirm the report of the hostages' location, but said they believe a local Afar group is responsible.

Afar separatist rebels, pro-government militia, and bandits all operate in the area of northeast Ethiopia, one of the hottest and poorest parts of the globe.

A witness and local officials have told Reuters the kidnappers might have been Afar rebels based in Eritrea.

The five foreigners include three British men, an Italian-British woman, and a French woman. The eight Ethiopians were with them as guides and drivers.

In Mekele, a day's drive from the kidnap scene but the nearest town with an airport, several British officials monitored the case from a local hotel.

REUTERS AKJ HT1552