Baghdad: An attack on a US convoy sparked a large fire in a marketplace in eastern Baghdad on Monday, as gunmen in Basra assassinated a police commander who was also a senior member of a leading Shiite political party.

Dozens of stalls were set ablaze when a bomb exploded next to a convoy of US military vehicles driving down a commercial street in the capital's eastern district.

A vehicle was damaged in the blast, said an Iraqi police officer.

Residents said more than a dozen US and Iraqi firefighting vehicles rushed to the scene to put out the blaze which continued until morning. The US military did not respond to a request for comment.

The attack comes amid continuing clashes between US and Iraqi forces and Shiite militias in eastern Baghdad.

The government is demanding that radical cleric Muqtada Al Sadr disband his Mahdi Army militia which has strongholds in Baghdad's sprawling Sadr City neighbourhood, the port city of Basra and other locations in southern Iraq.