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According to Reuters information agency, Jordanian-born Zarqawi, who had sworn loyalty to Osama bin Laden, had come to symbolize the radical Islamic insurgency against U.S. occupation in which thousands had been killed. His campaign is also believed to have played a major role in inflaming Sunni-Shi'ite tensions in the country.
U.S. officials in Iraq hailed his killing, but warned that Zarqawi's followers still posed a security threat to the Iraq government.
British Prime Minister Tony Blair said Zarqawi's death was a blow against al Qaeda everywhere.
"Today Zarqawi has been terminated," Iraqi Prime Minister Nuri al-Maliki announced at a televised news conference attended by the top U.S. commander in Iraq, General George Casey, and other senior officials.
"Every time a Zarqawi appears we will kill him," Maliki said. "We will continue confronting whoever follows his path. It is an open war between us."
Casey said the body of Zarqawi, who had a $25 million U.S. bounty on his head, had been identified and that details of his death would be revealed later on Thursday.
Maliki, who had been desperately in need of a success to bolster his authority, said seven Zarqawi aides were also killed in the raid in the city of Baquba 65 km (40 miles) north of the capital.
U.S. Ambassador Zalmay Khalilzad said Zarqawi's death marked a "great success". But the ambassador and Casey cautioned that it will not end violence in the country.
The announcement of Zarqawi's death had an impact on oil prices. Crude futures were down more than one dollar to $69.82.
Zarqawi, believed to be in his late 30s, has inspired an apparently endless supply of militants from across the Arab world to blow themselves up in suicide missions in Iraq.
Iraqi and U.S. officials say he has formed a loose alliance with Saddam Hussein's former agents, benefiting from their money, weapons and intelligence assets to press his campaign.
Some posters of the most wanted man in Iraq show him in glasses, looking like an accountant, others as a tough-looking man in a black skullcap.
Zarqawi's killing could be seen as one of the most significant developments for the United States forces and the Iraqi government it backs since the capture of Saddam.
Zarqawi appeared on a video in April unmasked for the first time, meeting his followers, firing a machinegun in the desert and condemning the entire Iraqi political process.
"Zarqawi didn't have a number two. I can't think of any single person who would succeed Zarqawi...In terms of effectiveness, there was no single leader in Iraq who could match his ruthlessness and his determination," said Rohan Gumaratna from the Institute of Defense and Strategic Studies in Singapore.
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