The Iraqi tanks had left the southern city of Basra and were heading towards the al-Faw peninsula on Thursday morning when UK forces engaged them.
Thought to be Russian-built T-55s, they were attacked by a similar number of better-equipped Challenger 2 tanks from the Royal Scots Dragoon Guards.
The bodies of the first British servicemen of 22 to die in the war so far are being
flown home to RAF Brize Norton on Saturday, it was confirmed
The tank battle was described as a "very quick, short, sharp engagement" by British military spokesman Group Captain Al Lockwood.
Wednesday night had also seen an attempt by a handful of Iraqi vehicles to break out of Basra past encircling British forces, officers said.
Despite initial reports of up to 120 vehicles leaving Basra, Defence Secretary Geoff Hoon said only three tanks were involved and these had all been destroyed.
You can tell this isn't a fighting formation that really knows its business
Air Marshal Brian Burridge
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The commander of UK forces in the Gulf, Air Marshal Brian Burridge, said the Iraqis involved in recent engagements appeared to have been forced by Baath party fighters to engage the British.
There has been confusion as to why Iraqi forces would venture out from the relative safety of Basra to likely destruction in the open.
Air Marshal Burridge said there was evidence of "exemplar executions" being carried out.
"They go to their houses and hold a gun to the heads of their families," he told a news conference in Qatar.
Aid struggles
"These militias - probably the Baath party militias - go through a neighbourhood, round up the existing soldiery, put them in their tanks and say 'go that way'.
"You can tell this isn't a fighting formation that really knows its business. It is disorganised, but there is someone trying to organise it."
A leader of the local Red Crescent called an attempt to deliver aid to the Iraq-Kuwait border town of Safwan on Wednesday a "disaster", after it was mobbed by fit young men before getting to the people it was aimed at.
But British reporters with UK troops reported successful delivery of some aid on Thursday to the southern town of al-Zubayr, which had been the scene of fierce fighting.
Troops trying to deliver aid there the previous day had fled after a sniper opened fire.
Most of those receiving aid on Thursday professed support for the US and UK - although
suspicion on both sides continued, with UK troops saying some of those queuing up for
hand-outs had probably been shooting at them just days before.
One man made it clear that coalition troops and their aid were
welcome only on Iraqi terms.
"You are here on the condition that you liberate Iraq," said resident Ali Salman
Hussein, 35.
"We don't want you to occupy us, we want you to liberate us and leave. If you
don't leave then we will hate you."