With American forces pressing ever closer to the holy sites of Najaf, militia of the Shiite cleric Moqtada al-Sadr are changing their military tactics, moving from defense to offense.
Over the past few days, Mahdi Army fighters have taken their fight deep into Baghdad, firing mortars and rockets at Iraqi government offices, coalition military positions, and even at living quarters where independent civilian contractors and journalists live.
In Basra on Monday, Mr. Sadr's men attacked a main pipeline, stopping the flow of oil. Repairs are under way, but the disruption is significant: About 90 percent of Iraq's exported oil moves through the southern port city.
By moving from guerrilla street warfare on their own turf to offensive attacks against the government, the Shiite militia may be signaling that it has abandoned hope of peaceful negotiation.
Speaking Monday from the Shrine of Ali in Najaf, Sadr said he would fight "until the last drop of my blood has been spilled."
Mahdi Army fighters say they see no other way out of this conflict. "We want peace, honestly. But if we have to fight, we want to have a final battle," says a local commander named Jassim, sitting with his year-old daughter in Sadr City.
US tanks pushed into Najaf Tuesday as helicopter gunships fired on Shiite militiamen hiding there. American patrols warned militants to leave or face death.
Referring to the week-long battle for Najaf, a fighter who calls himself Abu Rami says: "If they capture [our leader] Moqtada al-Sadr, or if they got inside the shrine of Ali, unbelievable things will happen."
Adopting terrorist tactics - such as shelling residential areas or bombing populated areas - is a sign of how serious the fight has become for the Mahdi Army.
In the past three days, it has rocked Baghdad with mortar and rocket attacks on Iraqi ministries and residential areas. But using terrorist tactics is not necessarily an indication that Sadr is abandoning mainstream politics for good. Indeed, he may see this as a perfect entrée.
"He seems to be trying to negotiate or bully his way into the political process," says Toby Dodge, a Middle East expert at the International Institute for Strategic Studies in London.
The struggle is being fought on two battlefields: one military and one political.
On the military side, Mahdi Army fighters are taking the conflict to a new level with the threat of attacks on civil and governmental areas as well as oil sites to ensure that Mahdi Army officials are included in any future Iraqi government.
On the political side, Prime Minister Iyad Allawi has extended an olive branch to Sadr. He's welcomed him to run for office next year, and says that fighters in Najaf are misusing Sadr's name for "criminal" purposes.
Mr. Allawi has been carrying out a two-pronged attack. His officials have permitted US forces to retake the Shrine of Imam Ali from the Mahdi Army, setting the stage for what may become a last stand for insurgents. The site is considered holy by Iraq's Shiite majority.
In Baghdad's Sadr City, fighting has been sporadic but fierce. At Sadr General Hospital, 51 civilians have been treated for wounds from shrapnel, gunshot, and rocket or mortar explosions. Eight more, including two children, have died of their wounds, hospital officials say.
One patient, Hattam Wanes Yasir, tearfully describes how his nine family members were wounded Tuesday night when a rocket or mortar fell onto his home in Sadr City.
"I don't know where the rocket came from," he says, adding that his son Hassan was killed in the attack. "If we were fighting we might feel less sorry, because at least we had accepted the risks, but we were doing nothing but sitting at home."
Teenager Haider Ali was with friends when they heard an explosion in their neighborhood. Ignoring his parents' pleas, he ran out to see the burning hulk of a Bradley Fighting Machine that had been immobilized by Mahdi Army fire. Then the Bradley opened fire to force enemy fighters to retreat. Haider and his two friends were severely wounded.
Now Haider lies unconscious. His family fans him and mops his brow. Doctors say he may not live. One friend, 11-year-old Kara Ali, has died. Another, Hussein Ali, has severe head injuries.
"Sometimes children are curious," says his cousin Samir Muaffaq, "they want to go out into the street. So when the Americans just spray bullets through the street, they kill many innocent people."
Knowing that civilian casualties are not in US interests, US forces announced a curfew Monday from 4 p.m. until 8 a.m. Tuesday, Mahdi Army officials called their own curfew, starting at 1 p.m., when their soldiers finish lunch and take naps. US forces are increasingly launching attacks at this time to take advantage of Mahdi Army vulnerability. Mahdi Army fighters want civilians off the streets to provide a clear line of fire.
Sadr City residents are starting to turn their anger on the Mahdi Army. "Families are getting upset with the Mahdi Army, because they are shooting at nothing," says a doctor at Sadr General.
Allawi should tap into this civilian anger, says Mr. Dodge. "What they need to do is set aside Sadr City [and] isolate it from the rest of the country, " he says. "The gamble is that the only ones with the organizational capability are the fighters."
• Material from wire services was used in this report.