An Egyptian official in Cairo said Egypt would temporarily close its mission here and has recalled its staff.
The announcement from Iraq's most feared terror group appeared on an al Qaeda-linked Web site and featured a brief video showing the blindfolded diplomat, Ihab al-Sherif, wearing a polo shirt. The video did not show his death, but the statement promised more details later.
"We announce in the name of al Qaeda in Iraq that the verdict of God against the ambassador of the infidels, the ambassador of Egypt, has been carried out. Thank God," a written statement in posting said, adding "Iraq is no longer safe for the infidels."
The Iraqi foreign ministry offered condolences for the "assassination" and an Egyptian diplomat who spoke to Egyptian reporters in Cairo said the government was sure al-Sherif was dead "from our own means." He spoke on condition of anonymity and did not elaborate.
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News of the killing marked a dramatic escalation in a campaign to discourage Arab and Muslim governments from sending ambassadors and strengthening ties with Iraq, as Washington wants. Last month, Iraqi Foreign Minister Hoshyar Zebari announced that Egypt would be the first Arab country to upgrade its diplomatic representation by appointing a full-fledged ambassador.
Government spokesman Laith Kubba said the apparent killing coupled with the explosions Thursday against the subway and a double-decker bus in London, which killed at least 37 people and wounded hundreds, "confirms that terrorism in not only targeting Iraqis but everyone."
In Cairo, Egyptian President Hosni Mubarak insisted his country will continue to support Iraq.
"This terrorist act will not deter Egypt from its firm position in support of Iraq and its people," the statement said. Al-Sherif "lost his life at the hands of terrorism that trades in Islam but knows no nation and no religion."