RIYADH – King Abdullah, monarch of the Gulf's most powerful Arab country, resumed power in oil-rich Saudi Arabia on Wednesday on his return to a Middle East transformed during his three-month absence.

As he flew in, the king boosted social benefits for his people, in a region where a young population and unemployment have since January combined with demands for political reform to create a cocktail for political upheaval.

"The assumption that a coalition of different elites could keep systems stable has proven not to be correct anymore," London-based Middle East analyst Neil Patrick told AFP. Abdullah must "be in a state of shock."

Men in white garb performed a traditional Aha dance while well-wishers including women, most in black niqab, waited to see their ruler as his plane touched down at Riyadh's King Khaled bin Abdul Aziz Airport.

Crown Prince Sultan bin Abdul Aziz, Interior Minister Prince Nayef bin Abdul Aziz and Bahrain's King Hamad were among a string of officials and royals who turned out to greet the 86-year-old monarch.

The Saudi king himself was seated in a black chair set up just outside the plane's door.

Saudi Arabia has declared Saturday a public holiday to mark King Abdullah's safe return home, following back surgery in New York and recuperation in Morocco.

Just hours before his return, the king boosted social benefits for civil servants, official media said. He also ordered implementation of a 15-percent pay rise for state employees and an increase in funds for Saudi housing loans.

King Abdullah also granted a pardon to some prisoners indicted for financial crimes and announced plans to combat unemployment. He is expected to carry out a cabinet reshuffle after several ministers' terms expired on February 19.

Streets and buildings in Riyadh were bedecked with national flags and large banners welcoming him back to Saudi Arabia, whose Arabian peninsula neighbours Bahrain and Yemen are in the throes of popular revolts.

The front pages of all Saudi newspapers concentrated on the king's return, giving priority over the escalating anti-regime revolt in Libya, as editorials linked its timing to the "unrest" sweeping the Arab world.

"The king is the only pillar of stability in the region now," said the English-language Arab News.

Abdullah's return came as a revolt was in full swing in Libya against its maverick leader Moamer Kadhafi, who insulted the Saudi king at an Arab summit in Doha in March 2009.

"You are always lying and you're facing the grave and you were made by Britain and protected by the United States," Kadhafi told Abdullah in front of 15 other Arab leaders.

Tensions had already been running high since June 2004 when Kadhafi, who has ruled Libya since 1969, was accused in newspaper articles of allegedly plotting to assassinate Abdullah, then crown prince.

With the net closing on long-time leaders, Egyptian strongman Hosni Mubarak and close ally of King Abdullah was forced out of power under massive popular pressure on February 11 after a three-decade rule.

In mid-January, Tunisian president Zine El Abidine Ben Ali fled to Saudi Arabia's Red Sea city of Jeddah after protests toppled his regime.

The revolts have served as warning to all Arab leaders.

"Immunity no longer exists," said Mustafa Alani, director of the Dubai-based Gulf Research Centre, a private think-tank. "There is only one way to stay in power, and that is by meeting the demands of your people."

While its Shiite majority is spearheading calls for reform in Sunni-led Bahrain, Saudi Arabia's heavily oil-rich Eastern Province is home to most of the estimated two million Shiites out of a total 18-million population.

"Bahrain is a source of great concern to the Saudis: they know that this is not only about the survival of the regime there, but also about strategic political balance in the Gulf," said Alani.

The unrest in the Arab world has pushed oil prices higher on fear of disruption in supplies, but Saudi Arabia, the world's biggest crude exporter, has said it has the capacity to meet any shortage.

King Abdullah, whose Al-Saud family has ruled the country since 1932, flew to New York on November 22 and underwent surgery two days later for a debilitating herniated disc complicated by a haematoma.

Abdullah's half-brother, Crown Prince Sultan, himself 83, flew back home from Morocco last November to take over the running of the government in Abdullah's absence.