"Coalition forces were attacked with small arms fire and returned fire, killing two enemy fighters," she said, adding that no British forces were wounded.

The fighting, which lasted about 15 minutes, took place in Iraq's second-largest city, which has seen occasional outbreaks of violence over the past 15 months.

Earlier in the day, fighters loyal to Shia leader Muqtada al-Sadr declared holy war against British forces based in Basra after four of their comrades were arrested.

Sheikh Saad al-Basri, al-Sadr's representative in the overwhelmingly Shia city said: "We will wage jihad and war against the foreign troops, not against police and Iraqi forces."

'State of crisis'

"However, if they (the Iraqi personnel) fight on the side of the occupiers, we will strike them harshly."

"We will wage jihad and war against the foreign troops, not against police and Iraqi forces"

Sheikh Saad al-Basri,
al-Sadr's representative in Basra

Basri accused British forces of arresting four al-Sadr supporters in order to "create in Basra, the state of crisis that exists in Najaf".

An AFP photographer saw British troops deployed in armoured vehicles and tanks around al-Sadr's main offices and elsewhere in the city.

Police chief General Muhammad Kazem al-Ali said officials at al-Sadr's office had rejected his attempts to defuse the tension through negotiations.

Mortar rounds

Meanwhile, in Amara, north of Basra, a number of mortar rounds were fired at a British position in the city but there were no casualties, a British spokeswoman said.

Basra deputy governor Salam Audeh, who represents al-Sadr on a provincial council, accused foreign troops of reneging on a June truce that ended al-Sadr's uprising earlier this year.

The British military also confirmed that two projectiles were fired at a multinational base camp in Sibah, south of Basra on the Kuwaiti border. One hit the camp and the other fell short.

Neither caused any casualties, it said.