Coalition warplanes and artillery have attacked an Iraqi armoured column which broke out of the besieged southern city of Basra.
British troops are currently in position around Basra
A senior British officer said three tanks - thought to be the only ones in the convoy heading for the Faw peninsula - had been destroyed from the air.
The officer said armoured reinforcements were being sent to the Faw area to support UK forces there.
Officials earlier said the column, which left the south-east of Basra late on Wednesday, was made up of between 70 and 120 vehicles.
The BBC's Clive Myrie says the Iraqi dash out of Basra may be a counter-attack to recapture ground lost over the last two or three days - or possibly a tactical retreat.
British radar spotted the column following the coast road along the Shatt al-Arab waterway and a number of fighter jets were scrambled to engage it.
British troops are currently positioned along the coast road as well as around Basra, amid reports of an uprising in the city. Those reports have been dismissed by the Iraqis.
British forces said most resistance in Basra came from paramilitaries loyal to Saddam Hussein rather than from the regular army.
But UK troops have been reluctant to enter Basra aggressively because of the risk to civilians.
A reporter in Basra for Qatar-based television station al-Jazeera said "there are no signs of the reported uprising".
Baghdad dismissed claims that a rebellion was under way as "lies".
In London, UK Defence Secretary Geoff Hoon conceded that the situation inside the city was "unclear".
Raising humanitarian concerns, the Red Cross said it had been unable to get medical supplies to Basra's wounded civilians.
Only half of the city's water supply was working, it said.
UK Prime Minister Tony Blair told parliament that any offer of help to rebels would be decided by commanders on the ground.
He said it was essential not to encourage uprisings to take place too soon.
"We've got to be careful we know we have the support in place, [and are] able to help them before we encourage them to do things that may lead to their death," he said.
But while the extent of the reported rebellion remained uncertain, Mr Blair said it was clear that Iraqis would "opt for freedom rather than repression" once they knew Saddam Hussein's rule was coming to an end.