(Incorporates SYRIA-CRISIS/BLAST)
BEIRUT, June 28 (Reuters) - Islamist rebels waged a counter-offensive in Syria's border town of Albu Kamal on Saturday, challenging the grip of the Islamic State in Iraq and the Levant (ISIL) which has seized large areas on each side of the crumbling Iraqi-Syrian frontier.
Earlier this week ISIL fighters appeared to be consolidating their hold over Albu Kamal when the local leader of the rival Nusra Front, al Qaeda's official branch in Syria, pledged allegiance to them.
ISIL is a more radical offshoot of al Qaeda that has its roots in Iraq and expanded into Syria shortly after the start of the three-year insurgency against President Bashar al-Assad.
It controls much of Syria's eastern oil-producing Euphrates River region, and its lightning gains in Iraq's Sunni Muslim northern and western provinces over the last three weeks means ISIL now commands a large cross-border expanse of territory - in which Albu Kamal forms an important link.
An Islamist website quoted Abu Yusuf al-Masri, the local Nusra Front leader who gave an oath of allegiance to ISIL on Tuesday, as saying a suicide bomber blew himself in Albu Kamal on Friday night, killing three of Masri's men and wounding 20.
The Syrian Observatory for Human Rights, a Britain-based monitoring group, reported heavy fighting overnight and into Saturday in the town between ISIL-aligned forces and rival Islamists, who include Nusra Front fighters from outside the town who had not sided with ISIL.
The Observatory's Rami Abdul Rahman said local tribal figures were trying to broker a ceasefire across the eastern province of Deir al-Zor where Albu Kamal is located.
Albu Kamal lies across the border from the Iraqi town of al-Qaim, which was seized by ISIL fighters more than a week ago.
The town was bombed by jets on Tuesday in an attack which Iraqi and Syrian sources said was carried out by Syria's air force. State media in Damascus denied that any Syrian planes struck inside Iraq and Iraq's prime minister said the Syrian jets hit targets inside Syrian territory.
The military gains by Islamic State fighters have highlighted the extent to which the conflict in Iraq is intertwined with the civil war in Syria, where more than 160,000 people have been killed in the last three years.
On Saturday several people were killed, including at least two children, when a car bomb exploded in the Syrian town of Douma, northeast of the capital Damascus, the Observatory said.
Video uploaded on the Internet by activists showed the flaming wreckage of an overturned vehicle in front of the blackened pillars of a nearby building, which activists said was located in a popular Douma market. (Reporting by Dominic Evans; Editing by Mark Heinrich)
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