The demonstrations comes ahead a Sunday midnight deadline for naming an interim prime minister. that was missed by the country's parliament.
The attack came a day after a string of suspicious stabbing incidents targeting demonstrators left 13 wounded in Baghdad’s Tahrir Square, the epicentre of Iraq’s leaderless protest movement.
Iraqi protesters are concerned whether Prime Minister Mahdi's replacement will be acceptable to the nation, while experts warn that any bold moves by Iran could lead to further bloodshed or worse.
The anti-Iranian sentiment that has dominated weeks of protests in Iraq might have been a turning point.
Security forces fired live rounds on protesters in Karbala, killing two anti-government protesters, security and medical officials said.
The demonstrator died after he was hit in his head by a gas canister in the protests that erupted late on Tuesday in front of the Basra Governorate building.
Tens of thousands of people have taken to the streets in recent weeks in Baghdad and across the south demanding sweeping political change.
The deaths bring to nearly 250 the overall number of people killed this month in Iraq as security forces crackdown on the growing protest movement.
Iraq was rocked by demonstrations in early October, first denouncing corruption and unemployment before evolving into calls for an overhaul of the political system.
To help Iraq in tackling Daesh, the US offered to move its troops to Iraq after the Syria pullout. But Washington faced an unprecedented denial from Baghdad.
Security forces use tear gas, water cannon and live fire to disperse demonstrations over unemployment, corruption and poor public services in capital Baghdad and other provinces.
Basra, Iraq's second biggest city, has been roiled by five days of deadly demonstrations, in which government buildings have been ransacked and set alight by protesters angry over political corruption.
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