An air strike in a western Iraqi town near the Syrian border still controlled by the Islamic State group killed and wounded dozens of civilians on Wednesday, officials said.

The deadly strike came as Iraqi forces battled jihadists deep inside Mosul, edging closer to the River Tigris that divides the city and looking for a breakthrough in the seven-week-old offensive.

The speaker of Iraq's parliament, Salim al-Juburi condemned the air strike "that targeted a market area for civilians and resulted in the death and injury of dozens of them" in the town of Al-Qaim.

If confirmed, the blunder would be one of the worst cases of civilians being killed in strikes in Iraq since the start of the air campaign against IS in 2014.

Officials in Anbar, the western province in which Al-Qaim is located, said dozens were killed in the afternoon strike, although AFP could not reach sources in the town to confirm the casualty toll.

A spokesman for the provincial council of Anbar claimed the strike was carried out by an Iraqi aircraft in the afternoon.

"The strike hit a market at peak hour, there were retirees queueing up pick up their pension, people collecting salaries and social security payments," Eid Ammash said.

"Entire families were killed," he said.

Another officials blamed the strike on the US-led coalition that has carried out thousands of air strikes against IS in Iraq and Syria since 2014.

There was no immediate comment from Iraq's Joint Operations Command coordinating the fight against IS and the coalition denied carrying out any strikes in the area at the time.

"We didn't conduct strikes in the area at the time of the incident," coalition spokesman Colonel John Dorrian told AFP.

- Army pinned back in Mosul -

Meanwhile in east Mosul, the 9th Armoured Division had reached Al-Salam hospital in a push on Tuesday, the farthest the army had penetrated into the city since the start of a broad offensive launched on October 17.

But it quickly found itself surrounded by jihadists and needed support from the elite Counter-Terrorism Service to pull back, commanders said.

"Our forces dealt with the situation at Al-Salam hospital" in southeastern Mosul, Maan Saadi, a CTS commander, told AFP.

"Our mission was to offer support to the 9th Division forces surrounded in the hospital, our units accomplished this mission and opened a passage," he said.

Saadi said the army was now occupying a position nearly one kilometre (less than a mile) from the hospital, which a 9th Division commander said had been used by IS as a command centre.

The five-storey building towers above the neighbourhood and the jihadists had been using the upper floors and roof as sniper positions for some time, Mosul residents said.

The IS-affiliated Amaq news agency said the jihadists had carried out five suicide car bomb attacks in the area inflicted heavy losses on the army.

CTS has spearheaded the drive into Mosul in the past month, retaking several neighbourhoods in the east of the city.

The army also punched into Mosul in November but its progress has been slower and Iraqi forces barely control half of the eastern side of the city.

Saadi said his forces had retaken two neighbourhoods in eastern Mosul and were aiming to flush out jihadists from two more in the coming days.

"We are now in Al-Taamim which is three kilometres (two miles) from the river, including an open area of about one kilometre where there are no buildings," he said.

- Water crisis -

Forces on the southern and northern fronts made quick early gains when Iraq launched its largest military operation in years but progress has been slow in recent days.

One of the main factors hampering Iraqi forces in Mosul is the continued presence of hundreds of thousands of civilians, who either want to stay in their homes or are prevented from leaving by IS.

The United Nations on Wednesday put the overall number of people displaced by the offensive at more than 82,000, less than half the number the UN expected before the offensive.

It its latest situation report, the UN spoke of spiralling civilian casualties as Iraqi forces went house to house in east Mosul, attempting to battle jihadists and protect civilians at the same time.

"Partners are rushing to bring trauma care closer to the front lines to give injured civilians the best chance of survival," the Office for the Coordination of Humanitarian Affairs said.

It said work was also under way to repair water and electricity infrastructure in east Mosul, where it described the current water shortage as "critical".

The conditions for those massing in the camps on the city's outskirts were hardly better, with the onset of winter bringing freezing temperatures at night.

Dozens killed and wounded in west Iraq air strike: speaker
Baghdad (AFP) Dec 7, 2016 - An air strike in the jihadist-held western Iraqi town of Al-Qaim, near the Syrian border, killed and wounded dozens of civilians Wednesday, the parliament speaker said.

Speaker Salim al-Juburi condemned in a statement the air strike "that targeted a market area for civilians and resulted in the death and injury of dozens of them."

He said he "holds the government responsible for such mistakes" and demanded the immediate launch of an investigation into the alleged strike.

If confirmed, the blunder would be one of the worst cases of civilians being killed in strikes in Iraq since the start of the air campaign against the Islamic State group in 2014.

Officials in Anbar, the western province in which Al-Qaim is located, said dozens were killed in the afternoon strike, although AFP could not reach sources in the town to confirm the casualty toll.

A spokesman for the provincial council of Anbar claimed the strike was carried out by an Iraqi aircraft in the afternoon and demanded a government probe.

"The strike hit a market at peak hour, there were retirees queueing up pick up their pension, people collecting salaries and social security payments," Eid Ammash said.

"Entire families were killed," Ammash said.

Maath al-Jughaifi, a tribal leader in Haditha, the nearest city, said "between 70 people and 80 people were killed" in Al-Qaim but claimed the strike was carried out by the US-led coalition that has carried out thousands of strikes against IS.

There was no immediate comment from Iraq's Joint Operations Command supervising the fight against IS or from the US-led coalition.

Amaq, an IS-affiliated propaganda website, released a video purporting to show the aftermath of the strike and claimed 120 people were killed.

AFP could not authenticate the footage, which showed devastation in a market area and a large number of dead and wounded strewn across the street or being treated.

Al-Qaim lies a few kilometres from the border with Syria, around 320 kilometres (200 miles) west of the capital Baghdad, and is the last major town in Anbar still under IS control.