A Mehdi Army militiaman at the Imam Ali shrine in Najaf. (AFP)

Najaf, Aug. 21 (Reuters): Fighters loyal to Iraqi cleric Moqtada al-Sadr clashed with US troops in Najaf today after talks with religious authorities to end a siege at the city’s holiest shrine ran into difficulties.

Explosions from mortar bombs and rocket propelled-grenades echoed through the alleyways of the old city in Najaf, wrecking a day of relative calm in a two-week Shia uprising that has helped drive world oil prices to record highs.

Militiamen had earlier brandished weapons around the Imam Ali mosque, dampening hopes that an offer by Sadr to hand the shrine over to the clerical establishment would end the siege, the biggest challenge yet faced by Iraq’s interim government.

“Bring those Americans here to fight hand-to-hand,” one of Sadr’s followers said before the latest outbreak of fighting.

“They are cowards. They stay thousands of feet away in their airplanes. They are scared, they know we will slaughter them,” he said, biting his finger for emphasis.

In nearby Kufa witnesses said US forces had also clashed with militiamen today.