"It's a real humanitarian catastrophe," Lola Castro, World Food Programme regional director, told Reuters. "People are... scattered all over the place - by boat, by road."
Reuters has not been able to independently verify the accounts from Palma, a logistics hub for adjacent gas projects worth around $60 billion. Most communications to the town were cut on Wednesday. Phone calls to Mozambique's government and security officials went unanswered on Tuesday.
The district where Palma is located is home to around 110,000 people, according to U.N. estimates. They include about 43,600 who sought shelter there after fleeing attacks elsewhere in Cabo Delgado province, which has been home to a simmering Islamist insurgency since 2017.
"(Many) came to Palma looking for safety, and they have left Palma without any," said Jonathan Whittall, director of analysis at international aid group Medecins Sans Frontieres.
Portugal will send 60 soldiers to help train armed forces in Cabo Delgado next month, state news agency Lusa reported.
The number of people displaced in the latest attack was likely to be in the tens of thousands, aid workers told Reuters.
Some would likely be trying to make their way south to the provincial capital, Pemba, by boat, they said, while others were headed north through the bush toward the Tanzania boarder.
A group arriving in Pemba told the U.N. refugee agency that their initial attempts to seek safety in Tanzania were thwarted by a difficult river crossing.
WFP had flown doctors into the Palma area and ferried hundreds of people to safety, including aid workers. However, three humanitarian workers remained unaccounted for, Castro said.
A private security firm contracted by the government and companies with personnel in the town were also searching for survivors.
Lionel Dyck, who runs Dyck Advisory Group, a South African firm that works with Mozambique’s government, said his helicopters had come under heavy fire from insurgents wielding AK-47s, machine guns and mortars as they plucked people from the bush.
He said most were being flown to a camp outside Palma used by the gas developments, which are led oil by oil majors like Total TOTF.PA .
Islamic State claimed the attack on Palma on Monday via its Amaq news agency. A U.S. official said it may show the group's increasing "brazenness" in Mozambique, where militants are now seeking to hold towns.
(Additional reporting by Emma Rumney in Johannesburg, David Lewis in Nairobi, Patricia Rua and Catarina Demony in Lisbon; Writing by Emma Rumney; Editing by Olivia Kumwenda, Alexanda Zavis and Nick Macfie) ((Emma.Rumney@thomsonreuters.com; +27115952832;))