A roadside bomb hit a convoy of vehicles in the southern city of Basra, causing casualties. Officials in London denied initial reports of an attack.
Iraqi police Capt. Mushtaq Talib said four people were killed in the blast and that it struck a British diplomatic convoy. Khudief Sabih, a schoolboy who claimed to have witnessed the attack, also confirmed four people were killed.
But the Foreign Office in London challenged the police report.
"It wasn't a diplomatic convoy, and no British consulate or government staff were involved," said a spokesman, on condition of anonymity in line with government policy.
"The exact circumstances of the incident are being investigated," the spokesman said.
Southern Iraq, where some 8,500 British troops are deployed, has been mostly calm since a U.S. and British forces occupied Iraq more than two years ago, the AP reports.
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The video starts when the drone was flying over railway tracks. It then flies near the Ferris wheel and the Church of All Saints in the city centre