The blast gutted the market at about 6.50pm as shoppers made last-minute purchases in the southern district of al-Amin.

“We have received 14 bodies and admitted 38 wounded, including six women,” a medical official from al-Kindi hospital, in Baghdad, said.

The attack on al-Amin came as Shia and Sunni militants continued to fight a low-level sectarian war despite the presence in Baghdad of more than 60,000 US and Iraqi troops.

Four other people were shot dead around the capital and two civilians were killed when a car bomb exploded outside a petrol station.

In the late morning, a convoy from the British Embassy was hit by a roadside bomb in the previously smart Mansour district, not far from the green zone, where US and British diplomats live under armed guard.

“An incident occurred this morning involving British embassy personnel travelling outside the International Zone,” an embassy spokesman said. “There were no injuries.”

The embassy refused to comment on whether the attack was aimed specifically at the British or if their three-vehicle convoy was simply a target of opportunity. Dominic Asquith, the British Ambassador, was in Basra today.

The Mansour district, once famous for its posh restaurants and luxurious homes, is now mainly deserted and rife with violence.

Gunmen kidnapped four Russian embassy staff driving through Mansour in May. They were later killed by an insurgent umbrella group that included al-Qaeda in Iraq.

Two British bodyguards for British diplomats were killed in a bomb blast near Basra in July 2005 and the British Embassy was struck by two rockets in February.

Salah Mutlak, an Iraqi Sunni MP, told The Times that the bodies of three members of his National Dialogue party, who had been abducted two days earlier from western Baghdad, were found in hospital yesterday.

In the mixed Sunni-Shia province of Diyala, east of Baghdad, nine people were killed. Sectarian strife has resulted in the deaths of hundreds in Diyala in recent months.

Iraqi state television quoted Nouri al-Maliki, the Iraqi Prime Minister, as saying that Iraqi troops will take over security responsibility in Dhi Qar province in September. The southern province, which is currently protected by the Italians, will become the second region to fall under the full command of Iraqi troops. In July British troops handed over the neighbouring province of Muthanna. While the south is far quieter than central and northern Iraq, the region has been roiled by its own deadly fighting among Shia parties.

Mr al-Maliki pledged that Iraqi forces would be in control of most of the country by the end of the year. “By the end of the year we hope that security in most of the provinces will be handed over,” he told reporters.

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