According to a study by The Control Risk Group consultancy, London is more at risk from an attack by "Islamic extremists" than either New York or Washington.
"London has become the pre-eminent terrorist target in Western Europe," said Jake Stratton, research director of the company's 2004 RiskMap report.
Previously the "Islamic extremist threat" had been a "vague, undefined war against the West", he said.
"But in the last year Britain has reinforced its position in the eyes of the Islamic world as the major ally of the US."
Another factor making an attack on London a "serious possibility" is Britain's large Muslim population, the report said.
The risk of an attack on London has now risen from "weak" to "average" since last year, while for the rest of Western Europe and the United States the risk remains low.
Blair is seen by many as
The report speculates that a terrorist attack on the city would probably be in the form of a suicide attack either by an individual or a car bomb.
London, where Britain's political and economic power is concentrated, is a "very attractive target for Islamic extremists", Stratton said.
The report will give ammunition to those who argue that Blair's reasons for invading Iraq were flawed.
The prime minister said that removing Saddam Huseein from power would decrease the "terrorist" threat.
But six months after the Iraqi president was toppled, anti-western sentiment is still running high all ovber the Muslim world.