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By Dean Yates

BAGHDAD, July 7 (Reuters) - A huge truck bomb killed more than 100 people and wounded 250 in a crowded market in northern Iraq on Saturday, one of the deadliest attacks in the country this year, police and local officials said.

Colonel Abbas Mohammed Amin, the police chief in Tuz Khurmato, said he feared the toll would rise after the bomb destroyed dozens of shops and small houses.

"There are still bodies under rubble. We are trying to dig them out," Amin told Reuters, putting the death toll at more than 100. The town's mayor, Mohammed Rasheed, said 115 people had been killed and 60 homes and shops levelled.

Ambulances and civilian cars rushed the wounded to hospitals, which struggled to cope with the sheer number of victims.

The bombing in the largely Shi'ite town was a blow to a U.S.-backed security crackdown in Iraq, and underscored the ability of militants to stage large-scale attacks despite the arrival of nearly 30,000 additional U.S. troops.

Tens of thousands of U.S. and Iraqi soldiers have been on the offensive in and around Baghdad in operations partly targeting car bomb factories that military commanders say are run by Sunni Islamist al Qaeda.

Those operations have pushed many militants outside the capital, where the troop presence is not as heavy.

U.S. officials blame most big car bombings on al Qaeda, which they say is trying to spark full-scale civil war between majority Shi'ites and minority Sunni Arabs.

The truck bomb exploded when many people in Tuz Khurmato were shopping.

Jasim Ali, 30, said he looked frantically for his wife when he heard the explosion echo across the town.

"I ran to the market and saw burned cars along with dead and wounded people everywhere. I screamed until I found my wife. She was wounded in the head and hand," said Ali, his clothes stained with his wife's blood.

In other violence, the U.S. military said eight soldiers had been killed in the past two days in Iraq.

A British soldier was also killed in the southern city of Basra in fierce fighting with militants overnight, during raids involving 1,000 troops which a military spokesman described as the biggest British operation in Iraq this year.

BUSH UNDER PRESSURE

Growing U.S. casualties have put U.S. President George W. Bush under increasing pressure from opposition Democrats and from some senior figures in his own Republican Party to justify his strategy of ordering more troops to Iraq.

There are 157,000 U.S. military personnel in Iraq.

The April-June period was the deadliest three months for U.S. troops since the March 2003 U.S.-led invasion. So far this month, 22 soldiers have been killed, half of them in Baghdad.

Late on Friday, a suicide car bomber killed 22 people and wounded 17 when he drove his vehicle into a group of Shi'ite Kurds near Iraq's border with Iran. The victims were returning from a funeral, a local official said.

On the diplomatic front, Iranian officials made the first consular visit on Saturday to five Iranians who were detained by U.S. forces in northern Iraq in January, Iraqi Foreign Minister Hoshiyar Zebari said.

"This is the first such visit since they were detained. This is a positive development," Zebari told Reuters, adding that he hoped it would lead to more U.S.-Iranian talks.

The U.S. military says the five detained Iranians are linked to Iran's Revolutionary Guards and were backing militants in Iraq. Iran has insisted they are diplomats, demanded they be freed and sought access to the men.

Iraq has been pressing both countries to hold a second round of talks in Baghdad to follow up a landmark meeting in May at which senior envoys from the two sides discussed the violence in Iraq.

Washington accuses Iran of fomenting violence in Iraq, a charge Tehran denies. (Additional reporting by Mariam Karouny, Alister Bull, Mussab Al-Khairalla and Waleed Ibrahim)

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