A top US diplomat has apologised for saying America's policy in Iraq displayed "arrogance" and "stupidity".

Bombs ripped through crowds of Iraqi shoppers stocking up on sweets and other delicacies ahead of the Muslim holiday of Eid al-Fitr, killing at least five people, police said today.

US President George Bush reviewed Iraq strategy with his top commanders and national security advisers, but indicated little inclination for major changes to an increasingly divisive policy.