Police suspect a bomb that exploded outside a British Airways office in central London early this morning was intended for the American Express facility located inside, sources close to the investigation said.
They said the bombing was believed "Mideast related," though there was no initial evidence tying it to Libya or any other country or group.
It was placed on the pavement just outside a side entrance to the building leading to an American Express currency exchange office. The main part of the building is a reservation and ticketing center for British Airways and American Airlines.
The explosion at 4:45 a.m. caused extensive damage to the building and nearby stores on Oxford Street, one of London's busiest shopping boulevards. The street was largely empty at the time and the only injury reported was to a woman standing about 100 yards away who was knocked down, but not seriously hurt, by the blast.
There was widespread acknowledgement by British officials and U.S. diplomats that the bombing had increased fears among the U.S. business community here and potential American tourists that London is not safe.
In parliamentary statements today, both Prime Minister Margaret Thatcher and opposition political leaders went out of their way to reassure Americans. "Britain is a safe and good country to come to," Thatcher said.
This morning's explosion followed allegations by the government in Tripoli yesterday that American and Israeli intelligence agents had planned a series of terrorist acts in Europe that would be blamed on Libya. The Libyans said the two governments would use the acts to justify further bombing raids on Libya such as the one on April 15, in which U.S. planes flew from British bases.
Sources here said that initial investigation had eliminated the possibility of involvement by the Irish Republican Army, which has been responsible for previous central London explosions.
"We suspect that it is Arab or Mideast related," said one source, who suggested it was a grim warning that terrorists still could strike despite extra security precautions taken here in anticipation of Libyan retaliation for Britain's support of last week's U.S. air attack. They were "putting two fingers up to us to say 'we can still do it,' " he said.
All government buildings in Britain have been placed on "amber" alert, the second highest of a four-level code. British Airways has also increased security at London offices and at airports.
Although only scattered threats have been reported, American businesses in Britain have felt particularly vulnerable. Some have removed identifying signs and company names from buildings housing their offices and installed electronic surveillance equipment.
Last week, a group of executives representing U.S. companies here met to discuss security threats and precautions. Ironically, the meeting was called by American Express and took place at the U.S. Embassy, three blocks from this morning's explosion.
But despite their concern, some American companies are loath to demonstrate panic and anxious to demonstrate U.S. support for Thatcher, whose backing of the raid against Libya has been unpopular here. Reports early this week that AT&T had decided to pull out of an upcoming trade fair were quickly denied today both here and in the United States.
American diplomats have made public appearances here during the past several days, saying they are advising U.S. citizens to come to Britain, and invest money here.
Although there have been widely reported cancellations by tourists and entertainers who had scheduled British appearances, only one U.S. company so far is believed to have scaled back its plans. Petrolight, a St. Louis-based petrochemical firm, reportedly has decided not to send a team of executives to the opening of a plant here next week.
Meanwhile, criticism of Thatcher's role in the U.S. raid in Libya continued today with bitter parliamentary exchange between Thatcher and Labor Party leader Neil Kinnock.
Referring to a speech yesterday by President Reagan in which he said he was prepared to act again against Libya, Kinnock demanded that Thatcher "tell us frankly whether you would be prepared to endorse or assist in such a further similar raid."
Thatcher repeated assurances that permission granted U.S. planes to take off from British bases was one-time only. Further requests, she said, "would of course have to be considered . . . in the light of circumstances . . . at that time."
But Kinnock persisted, saying Thatcher had "now moved into the worst of all worlds, demonstrating both complicity and impotence" in relation to U.S. policy.
To mounting shouts and jeers from both sides of the parliamentary aisle, Thatcher retorted that Kinnock was seeking to "help the terrorist" by pushing for such answers to be given in advance.
Kinnock appealed to the Commons speaker to ask Thatcher to withdraw "a vile insult not acceptable in the bitterest exchanges."
Thatcher, in one of the House of Commons' rare apologies -- rarer still for the combative prime minister -- told Kinnock: "I did not seek to impute anything personal to you. If I did, I gladly withdraw it."
Labor moved quickly to capitalize on the exchange. In a televised interview this evening, deputy party leader Roy Hattersley said that Thatcher's remarks showed she was "out of control," and that her "character is becoming a problem for [her] Conservative Party."