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Shopkeeper Sharif Gul said the blast ignited a huge fire.
“People were burning,” he said at a hospital in Peshawar, the main town in the northwest. “There was nothing to put out the fire.”
Islamist militants with links to al Qaeda have carried out hundreds of bombings in Pakistan since 2007, killing hundreds of soldiers, police, government officials and civilians.
The Pakistani army has carried out offensives against the militants in their strongholds in tribally administered regions such as Khyber, but the insurgents have proved to be a resilient foe. There have been conflicting reports of peace talks between some insurgent factions and the government in recent months.
While the frequency of large-scale attacks outside of the northwest has decreased over the last 18 months, the violence has triggered fears in the West that nuclear-armed Pakistan may be buckling under extremism.
The last major bombing was in September close to the Swat Valley, when a suicide bomber hit a funeral of a tribal elder opposed to the Taliban, killing 31 people.
Associated Press writer Riaz Khan contributed to this report from Peshawar.
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