BAGHDAD, Aug 16: Shia militiamen and US troops fought fierce battles in Najaf on Monday, just hours after political and religious leaders in Baghdad agreed to make a last-ditch appeal for peace.

Broadening their uprising from the urban battlefield in Najaf and seven other cities, the Mehdi militia of radical leader Moqtada al Sadr set an oil well on fire in southern Iraq, sparking a jump in world oil prices.

Iraqis meeting to pick an interim national assembly in Baghdad said they would send a delegation to Najaf to try to convince Moqtada Sadr to end a conflict that has killed hundreds and undermined the authority of Prime Minister Iyad Allawi.

Earlier, officials said the delegation had left Baghdad, but there were last minute hiccups with transport. Officials said the group now expected to leave early on Tuesday.

In the heart of Najaf, US soldiers, backed by tanks, exchanged fire with militiamen entrenched around the Imam Ali Mosque and an ancient cemetery. Explosions boomed and the crackle of machinegun fire echoed across the city, 160kms south of Baghdad.

The move to send the delegation came after the Najaf unrest again dominated the meeting in Baghdad where 1,300 political and religious leaders will select a 100-member assembly to oversee Iyad Allawi's interim government until elections in January.

"We will deliver this urgent call from the national conference to Moqtada al Sadr ... to try to solve this problem at its roots," said senior delegate Hussein al Sadr, a distant relative but a political opponent of the firebrand.

Moqtada Sadr would meet the delegation, an aide said. Fighting also raged between American soldiers and the Mehdi militia in a predominantly Shia slum in Baghdad, where gunmen exploded a bomb under a US tank and then set it on fire.

The crew escaped with minor wounds, a US army spokesman said. A US helicopter gunship later strafed the street where the tank was hit. Militiamen responded with rocket-propelled grenades and assault rifles.

FIGHT TO DEATH: The delegation will try to give Sadr a letter, urging him to leave the shrine, where he is holed up with his fighters and turn his Mehdi Army into a political party. But Sadr has shown little sign of compromise, vowing to fight to the death if necessary.

He has demanded US forces leave the city and the government grant an amnesty to his fighters as part of any deal to end the 12-day conflict. The unrest forced Iraq to keep a main southern oil pipeline shut on Monday, reducing export flows by almost half, an official said.

Three US soldiers were killed in action on Sunday in Najaf province, the military said. A French journalist holding a US passport has been seized in the southern city of Nassiriya, Al Jazeera television said. The television station said it had learned that the journalist was an archaeological reporter.

The interior ministry said it was checking reports that journalist Micah Jaren and his Iraqi translator were missing. The French and American embassies said they had no information on the report. Last week, gunmen kidnapped and then freed a British journalist in Basra.

HUMAN SHIELD: Thousands of protesters from southern Iraq have joined Moqtada Sadr in the Imam Ali Mosque, promising to act as human shield. "I will lie on the ground in front of the tanks, or I will kill the Americans to defend Sadr and Najaf," said Fadil Hamed, 30, a volunteer inside the mosque's marble-floored courtyard.

Iraq's interior ministry said it had issued an order for Iraqi and US forces not to attack the shrine. Despite the apparent pro-government stance of the delegation, the three-day conference has exposed deep divisions in Iraq over Najaf, with many delegates upset that US forces are fighting so close to one of the holiest sites for Muslims.

Some have threatened to quit an event already beset by boycotts from players such as Sadr and other religious groups. The interim assembly is due to be chosen by Tuesday.

Once appointed, the assembly will be able to veto legislation with a two-thirds majority, approve Iraq's budget, and appoint a new prime minister or president should either resign or die in office.

Guerillas fired mortars at the meeting just hours after it opened on Sunday, killing at least two people on the edge of the fortified compound where the gathering is being held.

The brazen attack starkly illustrated the country's precarious security as politicians and religious leaders plot the road to democracy before landmark elections in January. -Reuters