US troops, battling to crush a deadly two-pronged insurgency and stop Iraq sliding into chaos, bombed a mosque in the hotspot city of Fallujah on Wednesday, killing up to 40 Sunnis hiding inside.
More than 200 people have been killed on both the sides in four days of fierce clashes, with battles flaring between Shia and Sunni radicals and US-led troops in towns across Iraq, including Baghdad.
American leaders have vowed to hunt down and destroy the 'Thugs' in the militia of a radical Shia cleric behind much of the violence which erupted less than three months before the United States plans to hand over sovereignty to Iraqis.
The fiercely anti-American cleric Moqtada Sadr is attracting growing support from discontented Shias, angered that change has not come more quickly almost a year to the day since their oppressor Saddam Hussein was ousted.
American fighter aircraft slammed a Hell Fire missile and a laser-guided precision bomb into the mosque in Fallujah after three US Marines were wounded by rebel fire.
"We want to kill the people inside," Lieutenant Colonel Brennan Byrne said, adding that there were as many as 40 rebels holed up in the building.
US Marines have been locked in fierce fighting with Sunni insurgents in the town for three days, with some 46 Iraqis had been killed and dozens wounded in the town before the mosque bombing, hospital sources said.
The Marine operation involving some 2,000 troops dubbed "Vigilant Resolve" is aimed at flushing out insurgents who killed four American contractors last week, dragging their burned mutilated bodies through the streets and stringing two from a bridge.
All the city mosques were calling for a 'Jihad' against US-led occupation forces amid intense bombardments and aircraft over-flights, an AFP correspondent in the town said.
Calm was restored in Ramadi, 80km west of Baghdad on Wednesday, a day after 12 Marines were killed there in the worst single day loss for US forces this year.
But Ukrainian troops were forced to withdrew from Kut, south of Baghdad, after heavy fighting with Sadr's supporters who now controlled the city, the Ukrainian defence ministry said.
"At the request of the Americans, and to preserve the life of our military, the commander of the Ukrainian contingent decided to evacuate the civil administration staff and Ukrainian troops from Kut," the ministry said in a statement. The troops retreated to their base after fierce fighting, which left several dozen Iraqis and one Ukrainian soldier dead.
US Brigadier General Mark Kimmitt vowed coalition forces would turn the tables on the Shia Mehdi Army militia and called on Sadr to turn himself in to face murder charges, and help end the violence.
"Our offensive operations will be deliberate, they will be precise, and they will be powerful and they will succeed," he pledged.
"We are now understanding more and more about the Mehdi Army, how they operate, where they operate and against who they operate," he said.
The fierce clashes with Iraq's normally-peaceful Shia majority in the south have come as surprise to the US-led coalition which was already struggling to contain an uprising by Sunni loyalists further north.
The worsening security on the ground, which has seen coalition troops from several European countries as well as the US come under fire, has prompted growing concern.
Italian newspapers warned that the militia was planning to launch simultaneous attacks on coalition forces on Good Friday that could also target foreign civilians working in Iraq.
The militia would use rockets and car bombs to launch simultaneous attacks on coalition forces to mark the anniversary of the fall of Saddam Hussein's regime on April 9, the Corriere della Sera said.
US President George W. Bush was talking tough, vowing: "We will not be shaken by the Thugs and terrorists. These killers don't have values ... We face tough action in Iraq but we will stay on the course."
The Americans are considering whether to boost troop numbers in Iraq while Bush's allies have renewed pledges not to withdraw their forces ahead of the planned June 30 hand over of power to an Iraqi authority.
Bush was later on Wednesday to hold a teleconference with members of his National Security Council as well as the head of US Central Command, General John Abizaid, and Bremer, before phoning British Prime Minister Tony Blair, his main ally in Iraq.
Four Iraqis were killed in a US air raid on Sadr City overnight and three more died from wounds sustained in fighting a day earlier, a hospital director said on Wednesday.
In the southern city of Karbala, five Iranians and three Iraqis were killed and 16 wounded during overnight clashes between US troops and Mehdi Army militiamen.
Eight Iraqis were also killed on Wednesday and 12 wounded in an exchange of gunfire with US troops during a demonstration in Hawija, west of the northern Kurdish-dominated city of Kirkuk, to protest US attacks on Fallujah, police and medics said.
But calm returned to the southern city of Nassiriyah after a day of fierce fighting during which 15 Iraqis among them three rebels were killed.
As unrest in the occupied country spreads, a British government spending watchdog said on Wednesday that a software blunder has left Britain short of Chinook helicopters in Iraq and reliant on the United States to reach full battlefield capability.