The bomb left outside the Tiger Tiger bar complex in Haymarket near Piccadilly Circus was powerful enough to have caused 'significant injury or loss of life', British anti-terror police chief Peter Clarke said.

It was left in a car parked shortly after 1am, when 'hundreds' of people were in the vicinity, he said,

Even as a massive investigation into the Haymarket bomb was under way, police closed busy, prestigious Park Lane. Sky News reported that a 'suspicious vehicle' found near Hyde Park was connected to the car bomb found near Piccadilly Circus.

Britain's new home secretary, Ms Jacqui Smith, called an emergency meeting of top officials yesterday, calling the attempted attack 'international terrorism'.

'We are currently facing the most serious and sustained threat to our security from international terrorism,' she told reporters after the meeting.

Asked about possible links to a bomb found in France, Mr Clarke said he was in contact with international partners, but gave no details.

He said he could not ignore the similarities between the latest case and an earlier plot, uncovered in 2004, in which an Al-Qaeda militant had planned to detonate petrol-fuelled bombs inside vehicles in London and other cities.

It might also have echoes of another recent plot to attack targets including a high-profile nightclub, Mr Clarke said.

The bomb alert came almost two years after a series of coordinated suicide bomb attacks on London's transport network killed 52 commuters, the first Islamist suicide bombings in Western Europe. London has frequently been on edge since.

Security services were called to investigate the suspicious vehicle, a light green Mercedes, after ambulance workers, attending to an unrelated incident outside the nightclub, noticed what they thought was smoke billowing inside the car.

Officers discovered 'significant quantities' of petrol, a number of gas cylinders and a large number of nails, Mr Clarke said, and then manually defused the bomb.

Intelligence sources said they could not rule out a link to Al-Qaeda, or an Islamist-minded militant organisation.

'Numerically speaking, Al-Qaeda is a strong possibility but it is just too early to attribute specifically,' the source said, adding that it would be 'wrong and short-sighted' to rule out domestic options as well.

The discovery came hours after new Prime Minister Gordon Brown named a Cabinet to succeed Mr Tony Blair's. It posed a first major challenge for Mr Brown's three-day-old administration.

Security around Parliament was stepped up, with police body-searching drivers of vehicles entering the compound.

At the Wimbledon tennis tournament, being played in London, a spokesman said: 'We will be advising our staff to be particularly vigilant.'

The incident in London has prompted New York to tighten security. The United States government yesterday urged Americans to be vigilant of suspicious activity, even though officials said they saw no potential terrorist threat in the run-up to the July 4 Independence Day holiday.

REUTERS, ASSOCIATED PRESS