There must be a real attempt to confront militia in Iraq because the current UK strategy is not working, Tory leader Michael Howard has said.
Petrol bombs were thrown at British armoured vehicles on Monday
Mr Howard said pulling UK troops out of Iraq could be disastrous and make the country a centre for world terrorism.
He was speaking after a week which has seen authorities in Basra say they will not co-operate with UK troops.
Meanwhile, former UK military chief Lord Bramall has raised questions over UK troops' role in Iraq.
He told BBC News: "We have got to not just muddle on, saying rather vaguely 'We will stick it through'...
"We have got to really have a plan, making up our mind whether there is a job to be done and whether the forces we have got out there at the moment can do it."
Mr Howard backed Lord Bramall's call for a serious reappraisal of the troops' role.
"We are where we are and the present strategy does not seem to be working," he said.
It must be made clear it was unacceptable to have armed militias in Iraq, he said.
Tackling the problem could start with those groups said to be loyal to the country's prime minister and interior minister.
Mr Howard admitted it would be tougher to take on groups like the Mahdi army loyal to Shia cleric Moqtada Sadr and the Badr Brigade, which is the armed wing of the Supreme Council of the Islamic Revolution.
But he warned of the dangers of pulling troops out now.
"There is a very real danger that we would leave behind a country which would be a hotbed for international terrorism, a centre for international terrorism, which could well be a disaster for the world," he said.
"I think that would be an irresponsible thing to do.
"Any arbitrary timetable or arbitrary declarations I think could lead to very, very serious and dangerous consequences."
Tony Blair's former special representative in Iraq, Sir Jeremy Greenstock later said the situation was bad but it was not time to set a withdrawal date.
He told BBC News: "It's extremely important that Baghdad and the centre holds a united Iraq together.
"If, as the months go by, this proves to be impossible and Iraq looks as if it's breaking down into a mosaic of different local baronies and militias etc, which might be a tendency if people look for security anywhere they can find it in society, then I think the coalition will have to think again about its presence.
"I do not think that has yet happened".
His comments come after Basra's governor, Mohammed al-Waili, said he would not cooperate with British troops until there was an apology for a raid to free two UK soldiers.
The UK has defended its action, saying the soldiers were handed to militiamen by rogue elements in the police.
British troops have reduced their presence on the Iraqi city's streets.
Labour sources stress that earlier this week, Iraqi Prime Minister Ibrahim al-Jaafari highlighted his government's efforts to combat infiltration of the security forces.
He said the armed forces and defence and interior ministries had to keep away from political differences.