The government has been urged to make a statement about photos apparently showing UK troops abusing an Iraqi.
The paper insists the photos are genuine
Liberal Democrat leader Charles urged a minister to speak to the Commons about the pictures, which he said would have a "massive impact" in Iraq.
The Ministry of Defence has begun an investigation into the photos, published in the Daily Mirror.
Some military personnel have questioned their authenticity, but the paper insisted they were genuine.
The series of pictures appear to show a hooded Iraqi prisoner being struck with a rifle butt,
being urinated on and having a gun held to his head.
The prime minister has already said that, if genuine, the abuse would be "completely and totally unacceptable".
Mr Kennedy said the impact of the photos would be huge even if they were fake.
"The veracity of those photographs I don't know," he said.
"But whether true or false there is no doubt whatsoever they are going to
have a massive impact in terms of domestic opinion within Iraq and again across
the Muslim world and the Arab world as a whole."
Mr Kennedy said many people would believe the pictures were genuine, and would take some convincing that they were not.
He warned: "This will drive further younger elements into the more radical
and violent hands and I fear will just help create still more suicide
'Tip of iceberg'
The Royal Military Police has begun investigations in the UK, the southern Iraqi city of Basra and Cyprus, where the regiment in question - the Queen's Lancashire Regiment - is based.
Sources close to the regiment have told the BBC they remain convinced the photographs are not genuine.
Their suspicions focus on the troops' clothing and equipment, the quality of the photos, and the lack of sweat, dirt or injuries on the body of the alleged victim.
The newspaper says the sources for its photos are two members of the regiment who are standing by their account of what happened.
The two said the images represented only the tip of the iceberg.
One said: "Maybe the officers don't know what is going on - but everybody else does. I have seen literally hundreds of pictures. The Army knows a lot more has happened."
An MoD spokesman said the first priority was to find out whether any abuse had taken place.
The possibility remained that the pictures were a reconstruction of an incident which had taken place.