Two members of Saraya al-Salam -- an armed faction linked to powerful Shiite cleric Moqtada Sadr -- were killed when their vehicle came under fire from the Asaib Ahl al-Haq force, which lost one fighter in the ensuing gun battle, the source said.

Security forces deployed en masse to quell the fighting, and Basra's governor Assad al-Eidani said on Thursday morning that the situation in the city was now "safe and under control".

The exchange of fire triggered panic only days after clashes between Sadr supporters and rival Iran-backed factions turned Baghdad's highly-secure Green Zone into a battlefield.

The lives of 30 Sadr supporters were lost in nearly 24 hours of clashes that erupted on Monday after they stormed the government headquarters in the Green Zone, which houses state institutions and foreign embassies.

The attack in Basra drew strong condemnation from Sadr representative Mohammed Saleh al-Iraqi, who lashed out at Qais al-Khazali, head of the Asaib Ahl al-Haq force.

"I warn you, Qais! If you do not restrain your insolent militias and if you do not absolve yourself of the murderers and criminals that are affiliated to you... you too are insolent," he said in a statement on Twitter.

Asaib Ahl al-Haq is part of the Hashed al-Shaabi, a pro-Iran ex-paramilitary network now integrated into the country's security forces.

Since elections in October 2021, Iraq has been paralysed due to disagreement between Shiite factions over forming a coalition, leaving the country without a new government, prime minister or president.