Gunmen opened fire from a highway overpass west of Baghdad, disabling two of the contractors' vehicles and killing "some" contractors, U.S. Brig. Gen. Mark Kimmitt, deputy operations chief, told reporters. He would give no further details.
The New York Times reported four contractors had been killed in the attack.
A third vehicle — hit by small arms fire — made it safely to a coalition base, Kimmitt said. He did not say who the contractors were working for or give their nationalities.
The attack followed Monday's deadly bombing in Baghdad, in which three General Electric workers and two bodyguards were among the 13 dead.
Attacks on contractors have led some firms to withdraw staff from Iraq and have slowed reconstruction work, some of which is seen as essential to promoting confidence in the interim Iraqi government and fostering security.
Meanwhile, differences emerged between the United States and Iraq's interim government over handing over Saddam Hussein and control of the Republican Palace, used as headquarters for chief administrator L. Paul Bremer.
New allegations also surfaced about the professionalism of the Iraqi police, who are due to assume greater responsibility for security after the formal end of the occupation June 30. Shiites accused police in Fallujah of handing over Shiite truck drivers to insurgents who butchered them after they were unable to pay a ransom.
In other developments:
Early Tuesday, saboteurs blasted two oil pipelines on the Faw peninsula of southern Iraq, forcing authorities to curb exports through the Gulf by half — from an average of 1.85 million barrels per day to more than 800,000 barrels.
The attacks sent ripples through the international petroleum markets. Contracts for U.S. light crude for July delivery jumped 81 cents in New York, before easing to US$37.17 per barrel. July contracts of Brent crude rose 41 cents before retreating to US$35.78, down 24 cents in late trading in London.
Iraqi officials told Dow Jones Newswires they expected to have the damage repaired within a few days. However, petroleum analyst Paul Horsnell, the head of energy research at Barclays Capital in London, said that as a result of the blasts, Iraq would probably fail to meet its export target of 2 million barrels a day for June.
Reviving petroleum exports is the key to restoring Iraq's economy after decades of war, international sanctions and Saddam's tyranny. However, repeated attacks have slowed the process of returning Iraq, with the world's second largest petroleum reserves after Saudi Arabia, to the forefront of global energy markets.
The attacks appeared to be part of a series assaults on the nation's infrastructure to undermine confidence in the new government which takes power June 30. On Monday, a car bomb killed 13 people in Baghdad, including three foreign engineers working to restore the electricity sector.
Brig. Gen. Mark Kimmitt, the coalition deputy operations chief, said another convoy of contractors was ambushed Tuesday in Baghdad and that "some" people had been killed. Kimmitt refused to give further details.
A car bomb exploded Tuesday outside a coalition base near Hillah south of Baghdad, killing one Iraqi and wounding another, the U.S. military said. Gunmen killed an Iraqi police official Tuesday in a town near Hillah as he went to work, the military said.
In Washington, U.S. President George W. Bush said the United States was not prepared to hand over Saddam to Iraqi authorities until "appropriate security" was in place. Interim Prime Minister Iyad Allawi had said the Americans would turn over Saddam by the transfer of sovereignty.
Bush told reporters in Washington that the United States wanted Saddam tried for his "horrendous murders and torture that he inflicted upon the Iraqi people" but only after security and other arrangements had been finalized.
"I want to make sure that when sovereignty is transferred, Saddam Hussein stays in jail," Bush said.
Salem Chalabi, the Iraqi official in charge of setting up a tribunal to try former regime figures, told The Associated Press he expected an arrest warrant filed against Saddam and other former officials before June 30.
Saddam's status was not the only issue which appeared to divide the Americans and the Iraqi government as the handover of power approaches. On his return Tuesday from the United States, interim President Ghazi al-Yawer said Iraq would insist on the return of the Republican Palace to Iraqi control.
U.S. officials have said they intend to use the palace, located in the Green Zone along the Tigris River, for offices which cannot be accommodated in the U.S. Embassy, which formally opens with the end of the occupation.
"There is no talk of inviting the United States to keep the Republican Palace as an embassy supplement," al-Yawer told reporters. "We asked that the Republican Palace be vacated in the fastest opportunity for us to use it as Iraqis, as a Republican Palace or a museum. Whatever we do with it is a matter for Iraqi sovereignty. It is a symbol of Iraqi sovereignty."
Coalition spokesman Dan Senor said the future of the palace and other facilities in the Green Zone were under discussion with Iraqi authorities. He noted that the U.S. Embassy would be one of America's largest and "obviously we need substantial space, property, for the U.S. mission here."
The Americans are also concerned about security if they are unable to hold on to most of the fortified Green Zone. Questions have been raised about the capabilities of the Iraqi police following recent incidents, including the Monday car-bombing, after which youths looted the vehicles, burned an American flag and prompted both U.S. troops and Iraqi police to withdraw.
On Tuesday, dozens of Iraqi Shiites complained that Shiite drivers who had sought refuge in a police station in Fallujah were instead handed over to extremists who murdered them. Six of them were found dead Monday in a morgue in Ramadi.
At a protest rally Tuesday, a 12-year-old boy, Mohammed Khudeir, said he was among those allegedly handed over by the police to a hardline cleric. But the cleric and his followers let him go, apparently because of his age.
"We tried to seek police protection, but the policemen handed us over," Khudeir said. He said the cleric "handed us over to a group of Arabs who spoke with non-Iraqi accents. I was tortured for a while, but then I was released."
Khudeir's brother and uncle were slain by the insurgents, he said.
Alaa Mery said that on June 8, he went to Fallujah to negotiate for the hostages' release. He said he met with some Syrians who identified themselves as members of the extremist Wahhabist sect and said they were holding the drivers because they collaborated with the Americans.
The Syrians demanded the money which the families could not pay, he said.
"Fallujah clerics and people made a big fuss regarding Abu Ghraib torture, but now they are killing and mutilating Muslims," Mery said, referring to the American abuse of Iraqis at the Abu Ghraib prison. "They are not resistance. They are a copy of Saddam."