Azerbaijan said on Sunday that Armenian armed forces had shelled its second city of Ganja in a major new escalation of the conflict in the South Caucasus.

Armenia denied that it fired towards Azerbaijan, but the leader of Nagorno-Karabakh, an ethnic Armenian enclave inside Azerbaijan, said his forces had destroyed a military airbase located in Ganja.

“Permanent military units located in the large cities of Azerbaijan from now on become the targets of the defence army,” said Karabakh leader Arayik Harutyunyan.

The Azeri defence ministry said the cities of Terter and Horadiz near the de-facto border with Nagorno-Karabakh were under heavy shelling, while the breakaway region’s military said its capital, Stepanakert, was under bombardment.

The fighting began a week ago and has surged to its worst level since the 1990s, when some 30,000 people were killed.

The conflict risks dragging in other regional powers such as Russia and Turkey and disrupting energy supplies via the South Caucasus, where pipelines carry Azeri oil and gas to world markets.