"The elements who are against obscenity and vulgarity are behind the blast," he said, referring to groups that have previously targeted music and video shops.

Swat operation

Al Jazeera's Imran Khan, reporting from Islamabad, said: "There was a fear in Pakistan - among analysts and ordinary people - that any operation the army undertook in the Swat valley to route the Taliban would result in a renewed wave of suicide bombings by the Pakistani Taliban.

In depth

 Video: Inside Pakistan's conflict zone
 Diary: Imran Khan
 Riz Khan: Obama's 'AfPak' strategy
 Riz Khan: The battle for the soul of Pakistan
 Interview: Asif Ali Zardari
 Q&A: The struggle for Swat
 Your views: Crisis in Swat
 The fight for northwest Pakistan
Talking to the Taliban
Pakistan's war

"This attack - if it is anything to do with the Pakistani Taliban - just goes to show how fragile and dangerous the situation in the country has become."

No group has yet claimed responsibility for the attack.

The blast came as Pakistani troops intensified their campaign against the Taliban in Swat, a district within the North West Frontier Province, of which Peshawar is the capital.

The military claims to have gained control of most major towns in Swat and has said it is closing in on Mingora, the valley's main city.

"They believe they will be taking the city [of Mingora] in the the next 34 to 48 hours," said Al Jazeera's Mike Hanna, who travelled to the war zone, escorted by the Pakistani military, early on Friday morning.

"The army says it has secured large areas and that it has hit the militant movement very strongly, but the fact that we are still escorted by helicopter gunships ... indicates that there is still a fear of ongoing action," he reported.

Humanitarian concerns

The military also claims to have cleared the Taliban from mountain hideouts in Peochar.

But the army's advance has come at a cost.

An estimated 1.9 million people have fled the fighting in Swat and its neighbouring districts since the army launched its offensive last month.

The military claims to have gained control of
most major towns in Swat [AFP]
More than 160,000 are staying in camps just south of the battle zone, while the rest have been taken in by relatives.

The United Nations appealed on Friday for $543m to ease the "incredible suffering" of the nearly two million refugees.

The world body said the money was urgently needed to fund some 165 projects drawn up by UN agencies and aid groups to assist civilians.

"The scale of this displacement is extraordinary in terms of size and speed and has caused incredible suffering," Martin Mogwanja, the acting UN humanitarian co-ordinator in Pakistan, said in a statement.

"We are calling for generous support from the international community."

US pressure

The Pakistani effort to halt the Taliban follows urging from the US, which is itself battling Taliban fighters in neighbouring Afghanistan.

Some have expressed concern that a planned US troop build-up in Afghanistan could further destabilise Pakistan.

But Admiral Mike Mullen, the US joint chiefs of staff chairman, said that efforts were under way to avoid that.

He told the Senate Foreign Relations Committee in Washington that he believed the impending deployment of an extra 21,000 US troops in Afghanistan was "about right" to tackle the Taliban there.