On Thursday around 200 protesters upset by Manama's hosting of a US-led Middle East peace conference torched Israeli flags outside the Bahrain embassy in Baghdad and hoisted Iraqi and Palestinian flags.

It came after US President Donald Trump's advisor and son-in-law Jared Kushner earlier this week launched a Middle East peace initiative in the form of a $50 billion economic plan.

The Palestinian Authority boycotted the "Peace to Prosperity" workshop in Manama, accusing the unabashedly pro-Israel Trump of dangling the prospect of cash to try to impose political solutions and ignoring Israeli occupation.

Video footage of the Baghdad protests showed demonstrators chanting slogans supporting armed groups close to Iran -- which Bahrain has repeatedly accused of interferring in its internal affairs.

Iraqi security forces broke up the rally Thursday night as the interior ministry announced the arrest of 54 people accused of allegedly "attacking the (Bahraini) embassy".

Bahrain said it recalled its ambassador "for consultations" and held Baghdad responsible for its embassy security, a statement from the official Bahrain News Agency said late Thursday.

Iraqi Foreign Minister Mohammed Ali al-Hakim on Friday phoned his Bahraini counterpart Sheikh Khaled bin Ahmed Al-Khalifa to say Baghdad "condemns the attack".

Hakim also expressed hope that the incident would not "undermine diplomatic relations" between the two countries, the Iraqi foreign ministry said in a statement.

An Iraqi police official on Thursday said the protesters did not enter the embassy compound.