British National Party leader Nick Griffin predicted "Islamic terrorists" would detonate bombs in major British cities, Leeds Crown Court has heard.
Mr Griffin denies four counts of race hate charges
Mr Griffin and party activist Mark Collett are accused of using words or behaviour likely to stir up racial hatred, in speeches in West Yorkshire.
Mr Griffin made his prediction more than a year before the 7 July attacks.
Both men deny the charges which arose from speeches filmed in 2004 for the BBC documentary, The Secret Agent.
The jury was shown footage of Mr Griffin's speech at Morley Town Hall, Leeds, on 5 May 2004, in which he said: "There is going to be blood all over our streets."
During the video, which was one of six filmed by undercover reporter Jason Gwynne, Mr Griffin referred to a lack of difference between the political parties and said that given a choice, huge numbers of people would back the BNP.
"We all know that sooner or later there's going to be Islamic terrorists letting off bombs in major cities, and it might not be London, it could just as easily be the White Rose Centre (a Leeds shopping centre)," he said.
Mr Griffin went on to claim that when the attacks happened they would be carried out by asylum seekers or second generation Pakistanis living in Bradford.
"It's going to be done by them, and all the hatred that already exists between our community and their community, all that hatred's going to spill out, and so the other parties are just trying to keep the lid on the pressure cooker.
"It's so deeply stupid."
Mr Griffin told his audience there was going to be a backlash and urged them to vote for the BNP, so the backlash could be political.
Mr Griffin, 45, from Llanerfyl, Powys, is accused of four counts of using words or behaviour intended to, or likely to, stir up racial hatred, while Mr Collett, 24, from Rothley, near Leicester, faces eight charges.
Earlier, two speeches made by Mr Collett were also played to the jury of four women and eight men.
In them, he accused Asian people of being racist, hating white people, and being responsible for rapes and muggings on white girls and pensioners.
He described the BNP's fight as "our battle for Britain".
"I'd rather die today with my pride intact, fighting for what I believe in, than live the rest of my life as a sniffling pathetic slave to a multicultural society," he said.
Later, Rodney Jameson QC, prosecuting, read out police interviews with the defendants.
The jury heard that after viewing his speeches, Mr Griffin said: "There's no hatred in this audience, none from me," before replying "no comment" to all questions.
In a separate interview, Mr Collett said: "I'd just like to say that as a member of the British National Party I'm fully aware that the police are institutionally biased against the party and its members and thus I will be saying nothing further from this point."
He too then replied "no comment" to all further questions.
The trial was adjourned until Friday to allow time for legal issues.