A car bomb exploded at a funeral wake in a Shi'ite area of Iraq's capital on Thursday, killing at least 35 people, wounding dozens and triggering clashes between angry residents and police, health and security sources said.

The blast capped a bloody two weeks as suspected insurgents challenge Iraq's security forces ahead of the withdrawal this year of U.S. troops and try to undermine the newly reappointed Shi'ite-led government of Prime Minister Nuri al-Maliki.

Witnesses said a suicide bomber struck a funeral tent packed with relatives and guests in Baghdad's Shula district, a former stronghold of anti-U.S. cleric Moqtada al-Sadr but now thought to be controlled by a violent splinter group, Asaib al-Haq.

I see blood everywhere. I see at least five or six damaged cars, smoke rising from them, chairs scattered everywhere, said Murtadha Kadhem, a freelance TV cameraman working for Reuters.

Deputy Health Minister Khamis al-Saad said 35 people were killed and 65 wounded, and a local hospital official gave the same death toll. An Interior Ministry source put the toll at 37 dead and 78 wounded.

Two other security sources said more than 45 people were killed and around 120 were wounded.

The blast was the latest in a series of bombings in Iraq that have killed more than 150 people and wounded more than 500 in the past two weeks.

Suspected insurgents launched three days of suicide attacks against police and police recruits last week and planted car bombs targeting Shi'ite pilgrims streaming into the holy Shi'ite city of Kerbala in southern Iraq for a major religious rite.

The violence is occurring before an Arab League summit in March that could help Iraq reintegrate itself into a region where many Arab-led countries view the rise to political power of its Shi'ite majority with suspicion. They also fear Iran's growing influence in Baghdad.

U.S. forces are also due to withdraw this year, eight years after the invasion that toppled Sunni dictator Saddam Hussein, placing full responsibility for ensuring security on the shoulders of Iraqi police and troops.

NEW ALLIANCE?

Political analyst Ibrahim al-Sumaidaie suggested the recent attacks could signal a defacto alliance of Sunni Islamist al Qaeda and Shi'ite militants against the government.

I believe we are witnessing a cross-sectarian alliance of

insurgents ... They are ready to ally with Satan against the political process, he said. I think our security forces, with their current capabilities, along with the fragile political alliances, cannot stand in the face of this alliance.

The funeral bomber struck as relatives and friends mourned at the home of an elderly man who died while on the pilgrimage to Kerbala for the recent Arbain commemoration.

According to what I see, it was not a parked car bomb. It looked like a suicide bomber, driving a car, entered the funeral and blew up the car, said Ali al-Hilly of a neighbourhood council.

Armed clashes broke out in Shula, in northwest Baghdad, after the bomb blast, local officials and eyewitnesses said.

People were angry after the explosion. They charged out into the streets to protest against the security forces, said Nasser al-Sadi, the manager of Sadr's office in Shula.

The police opened fire against them or to disperse them and then some of the people responded by shooting back, he said.

Security forces poured into the area and told residents to

stay home while they searched for the gunmen, he said.

An eyewitness who asked not to be identified said the police had fired into the air but then came under attack from gunmen. Of course the police returned fire, the witness said.

Sadi said one person was killed and two wounded in the clashes.

At least four other fatal bombings struck Baghdad on Thursday, killing another five people and wounding more than 20.

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