Police believe they have caught four men suspected of trying to explode bombs on London's transport system last week after armed raids yesterday in the British capital and an arrest in Rome, a police source said.

"My belief is we have all four people we are seeking in custody," the source told Reuters.

Police would not confirm that Britain's biggest manhunt was over and repeated warnings that further attacks were possible after a day of fast-moving developments.

The abortive attacks took place on July 21, exactly two weeks after four British Muslims killed themselves and 52 people in blasts on three underground trains and a bus in London.

Anti-terrorist police chief Peter Clarke said two men arrested in London had identified themselves as Ibrahim Muktar Said and Ramzi Mohammed and named a third man arrested in Rome as Hussain Osman. Another man was arrested in London.

"The investigation has moved with some speed, but I must emphasise it is still continuing," Mr Clarke told reporters.

Police had been hunting for a 27-year-old man named Muktar Said-Ibrahim who they suspect tried to set off a device on a Number 26 bus on July 21.

Police arrested Yasin Hassan Omar, suspected of trying to explode a bomb on the underground, on Wednesday.

As the hunt for the suspected Islamist militants gathered pace, armed police surrounded an apartment in west London and a tense siege unfolded in front of neighbours, including Josephine Knight, 55, who followed events through her binoculars.

"They blew the door off with plastic explosives, then threw in canisters of tear gas," she told Reuters.

"About half a dozen officers moved along the balcony and peppered shots into the kitchen window."

Police in black flak jackets and gas masks rushed into the the housing estate in the Ladbroke Grove area, a few hundred metres from where a fifth bomb was found abandoned in bushes two days after the failed attacks.

The police had shouted: "Come out Mohammed. Take your underwear off," Ms Knight said.

A witness, who declined to give her name, said the police had told the suspect they needed to make sure he was not carrying explosives.

Another reported hearing up to six explosions and said police had told him they were caused by stun grenades.

A second raid took place in the nearby Notting Hill area. Witnesses saw one man handcuffed and held between two police officers as he was bundled into a van and taken away.

Italian Interior Minister Giuseppe Pisanu identified the man arrested in Rome as Osman Hussain, a naturalised Briton of Somali origin who left London for continental Europe after the failed attacks.

Italian police said Hussain had travelled by train from London to Paris to Milan, and then on to Rome where he was arrested yesterday afternoon at a relative's apartment in the southeastern Casilino neighbourhood. Also in London yesterday, the police arrested two women under anti-terrorism legislation at Liverpool Street station in the heart of the city and closed the complex.

The station was cordoned off while police investigated a suspect package. It was later reopened.

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