The British ministry of defence confirmed the death of the two British soldiers in the attack on a military convoy in the southern Iraqi city.
"It is with great regret that we can confirm that two British soldiers have died as a result of an attack on a British patrol near the town of Ad Dayr, north of Basra City earlier today," said a defence ministry statement on Monday.
A statement from the office of the Iraqi prime minister said that security forces aided by coalition troops had swept through suspected insurgent strongholds in the Euphrates valley south of Baghdad in the previous 24 hours.
The raids took place in a region south of Baghdad which is mainly inhabited my members of the country's restive Sunni minority and has been a focal point of the insurgency.
"The units in charge of the southern and middle Euphrates district, the 8th and 10th army divisions, killed 14 terrorists and arrested 98 of them along with 95 more suspects," the statement from Nuri al-Maliki's office said on Monday.
British troops are coming under
increasing attacks (File Photo)
Taken with the arrest of Hamed Jumaa al-Saeedi, alleged to be the al-Qaeda network's number two in Iraq, the arrests will be seen as a victory for al-Maliki's embattled government in its war with insurgents.
Police in Hilla, south of Baghdad, said that US forces and aircraft assisted Iraqi troops in the arrest operation near Jorf al-Sahkr, but there was no immediate confirmation of this from US headquarters in Iraq.
"An exchange of fire between gunmen and troops led to the death of an Iraqi soldier," an officer said, adding: "The clashes continued for four hours.
"Iraqi forces managed to confiscate large caches of weapons during the raid, while planes from the coalition forces bombed a number of areas."
A Sunni political party with MPs sitting in Iraq's fragile ruling coalition, however, condemned the operation, which it blamed on the US-led coalition, and demanded that detainees be released.
"Occupation forces carried out brutal raids in Abid Wayis village in Jorf al-Sakhr and arrested more than 100 Sunnis, among them Sheikh Ahmed Kassar of Salaheddin Al-Ayubi Mosque and his brothers and relatives," the General Council of the People in Iraq, said in a statement.
Meanwhile, the Iraqi police said some 35 bullet-riddled bodies, nearly all showing signs of torture, have been found dumped around Baghdad and in a southern city.
In Baghdad, 19 bodies were found during the morning in five neighbourhoods in the south and the west of the capital, while another 14 were found in the space of one hour in eastern and northern areas.
The bodies, all of men, were blindfolded and their feet and hands were tied, police said.
In Kut, 160km southeast of Baghdad, police found another two bodies dumped on a highway. Both had been shot in the head and chest.