The United States has ordered 120,000 more troops to the Gulf.
A senior US army general has said fierce Iraqi resistance and guerrilla-type tactics, combined with the invasion force's overstretched supply lines, point to a longer conflict than forecast.
Iraqi Defence Minister Sultan Hashim Ahmed said the invaders could surround the capital in coming days but said that they would have to fight for the capital street by street.
"We set up our [main] defences in Baghdad. It will be no surprise that in five to 10 days they will be able to encircle all our positions in Baghdad," he told a news conference.
"But they have to come into the city eventually . . . God willing, Baghdad will be impregnable. We will fight to the end and everywhere. History will record how well Iraqis performed in defence of their capital," Mr Ahmed said.
The United States and Britain began the war to overthrow Saddam and rid Iraq of alleged weapons of mass destruction. Iraq denies it has any, and none have yet been found.
Fears that a drawn-out war in Iraq could exacerbate fuel shortages pushed oil prices back up above $30 a barrel to their highest since the day before the war started.
Mr Bush and Mr Blair have called on the United Nations to resume its oil-for-food program as Asian shares continued to fall, affected by a drop in the value of airline stocks and hit by fuel worries and travellers' jitters at a time of war.
Iraq said the conflict had caused more than 4,000 civilian casualties, including over 350 dead. There was no independent confirmation of these figures.
According to the latest official count, 28 US and 20 British troops have been killed. Another 18 US and two British soldiers are listed as missing.