Militants fired rockets at Baghdad's fortified Green Zone as clashes between Shi'ite Muslim groups spilled into a second day, Iraq's military said, and Iran closed its border with Iraq after the worst fighting in the Iraqi capital for years.

Baghdad's streets were mostly empty on Tuesday. Gunmen cruised in pickup trucks carrying machine guns and brandishing grenade launchers, but residents observed a curfew. Overnight, sustained gun and rocket fire rang out across the city.

Twenty-two people were killed on Monday and more than 100 were wounded as supporters of Shi'ite cleric Moqtada al-Sadr, a former anti-U.S. insurgent leader, faced off against Shi'ite armed groups mostly loyal to Iran.

A prolonged political deadlock after an October election, during which the two camps have competed for power, has given the country its longest run without a government and led to new unrest as Iraq struggles to recover from decades of conflict.

This time the fighting is among the Shi'ite majority that has ruled Iraq since the 2003 U.S. invasion which toppled Sunni dictator Saddam Hussein.

Monday's violence was prompted by Sadr's announcement that he would withdraw from all political activity - a decision he said was in response to the failure of other Shi'ite leaders and parties to reform a corrupt and decaying governing system.

Sadr later said he was staging a hunger strike in protest against the use of weapons by all sides.

The Iraqi military declared an open-ended nationwide curfew and urged the protesters to leave the Green Zone, while the United States described the unrest as disturbing and called for dialogue to ease Iraq's political problems.

White House National Security Council spokesperson John Kirby said that Washington saw no immediate need to evacuate staff from its embassy in Baghdad's Green Zone.

IRAN CLOSES BORDER, HALTS FLIGHTS

Sadr has positioned himself as a nationalist who opposes all foreign interference, whether from the United States and the West or from Iran.

He has insisted on early elections and the dissolution of parliament, saying that no politician who has been in power since the U.S. invasion in 2003 should hold office.

He commands a thousands-strong militia and has millions of loyal supporters across the country. His opponents, longtime allies of Tehran, control dozens of paramilitary groups heavily armed and trained by Iranian forces.

Sadr and his opponents have long dominated state institutions and run large parts of the Iraqi state.

Neighbouring Iran closed its border with Iraq and urged its citizens to avoid travelling there, a senior official said. Iran's state television said flights had also been halted "until further notice because of the unrest there".

Millions of Iranians travel to the Iraqi city of Kerbala every year for the ritual of Arbaeen, which marks the end of a 40-day mourning period for the grandson of the Prophet Mohammad, Imam Hussein. Arbaeen falls on Sept. 16-17 this year.

"The border with Iraq has been closed. Due to safety concerns, it is necessary for Iranians to refrain from travelling to Iraq until further notice," state TV quoted Iran's deputy Interior Minister Majid Mirahmadi as saying.