KERBALA/RAMADI, Iraq - Two suicide bombers killed 120 people and wounded more than 200 in the Iraqi cities of Kerbala and Ramadi on Thursday in Iraq"s bloodiest day for four months.

Seven U.S. soldiers were also blown up in two separate attacks; another three bombs exploded in Baghdad, two of them detonated by suicide bombers; and insurgents sabotaged an oil pipeline near the northern city of Kirkuk, causing a huge fire.

Coming a day after 58 people died in a wave of bombings and shootings, the latest bloodshed appeared certain to ratchet up tension between Iraq"s Sunni and Shi"ite Muslims.

Kerbala is one of Shi"ite Islam"s holiest cities while Ramadi is a Sunni Arab stronghold and a hotbed of the insurgency.

The violence shattered hopes the country might start 2006 on a more peaceful footing, allowing for a swift reduction in U.S. troop levels.

The U.S. death toll was the highest since the December 15 election.

Violence has killed more than 240 people and wounded more than 280 in the five days since the New Year started, a death toll comparable with some of the nation"s bloodiest weeks since the U.S.-led invasion in March 2003.

"These groups of dark terror will not succeed through these cowardly acts in dissuading Iraqis in their bid to form a government of national unity," President Jalal Talabani said.

BLOOD AND DEBRIS

The Kerbala bomber detonated an explosive belt laced with ballbearings and a grenade, killing 50 and wounding 138 at a market within sight of the golden dome of the Imam Hussein shrine, one of the holiest sites in Shi"ite Islam.

Television pictures showed pools of blood in the street, which was littered with debris. Passers-by loaded the wounded into the backs of cars and vans, and one black-clad woman stood crying while clutching her dead or wounded baby to her chest.

"The bomb was caused by a suicide bomber wearing an explosive belt, walking among people," said Lieutenant-Colonel Razak al-Taee of the Iraqi police.

"Explosives experts found wires, ballbearings and a grenade used in the explosion," he told al-Iraqiya state television.

On Wednesday, a car bomb wounded three people in the first attack of its kind in Kerbala since December 2004. In March 2004 coordinated suicide bombings during an annual religious festival in the city killed more than 90 people.

Around an hour after the blast, another bomber blew himself up near a group of police and army recruits in the western city of Ramadi, killing 70 and wounding 65, hospital sources said.

The U.S. military said the blast ripped through a line of around 1,000 recruits as they waited to be security-screened at a glass and ceramics works which had been turned into a temporary recruiting center.

After the debris and body parts had been cleared away, hundreds of Iraqis returned to the queue, they said.

Insurgents have often attacked Iraqi police and army recruits, who the Americans hope will eventually replace them in the fight against the largely Sunni Arab insurgency, allowing U.S. troops to withdraw.

Many young Iraqi men are drawn to work in the security forces by the promise of relatively high pay, although thousands of them have been massacred.

SEVEN AMERICAN DEATHS

At least seven U.S. soldiers were killed in Thursday"s attacks, Iraqi police and the U.S. military said, taking the total number of U.S. fatalities since the start of the war to oust Saddam Hussein to 2,189, according to figures compiled by Reuters.

Five died in Baghdad when a roadside bomb hit their vehicle and two were killed near the southern city of Najaf when a similar device destroyed their Humvee, killing two civilians and wounding seven, including three U.S. soldiers.

Devices also exploded in Baghdad, although with less impact.

Three car bombs, two of them suicide attacks, rocked the capital in quick succession, suggesting a level of coordination that may be a response by Sunni Arab insurgents to the largely peaceful parliamentary election.

The bombs killed two people and wounded six, police and Interior Ministry sources said.

The Kerbala and Ramadi bombings were the bloodiest attacks in Iraq since September 14 when a suicide bomber killed 114 in a Shi"ite district of Baghdad, among around 150 killed in total.

Mistrust between Iraq"s majority Shi"ite and minority Sunni Arab communities has been heightened by the results of last month"s elections, which some Sunni and secular leaders say were rigged to favor the Shi"ites.

After a series of bilateral meetings in Kurdistan, political leaders have agreed to meet in Baghdad soon to push their plan for a national unity government able to stem the bloodshed that has become part of daily life for millions of Iraqis since the U.S.-led invasion of 2003.

(Additional reporting by Mariam Karouny, Gideon Long, Ahmed Rasheed, Omar al-Ibadi, Hiba Moussa and Ross Colvin in Baghdad)