Masked gunmen opened fire on a group of Iranian working on the pipeline project in the outskirts of the northeastern Iraqi town of Muqdadiya, killing 15 Iranian nationals, as well as three Iraqis.

Another five Iranians and two Iraqis were reportedly wounded in the fatal shooting.

The assault took place near the city of Baquba, some 50km (30 miles) north of Baghdad.

Later in the day, the Iranian foreign ministry strongly condemned the terrorist attack, expressing deep sympathy with families of the victims.

The ministry further noted that details surrounding the “appalling crime” are being investigated.

According to an eyewitness, the assailants sped up in three cars as he and his colleagues were digging a channel to extend the pipeline, intended to transfer Iranian natural gas to three Iraqi power stations.

Iran signed a deal in July to build a pipeline and export natural gas to Iraq to fuel its power plants in Baghdad and Diyala provinces, where the attack took place.

Violence in Iraq this year has reached a level not seen since 2008.

The UN has said the monthly death toll dropped to 659 in November, including 565 civilians and 94 members of the Iraqi security forces, compared with 979 in October.

But more than 7,150 civilians and 950 security forces personnel have now been killed since January, the highest annual toll since 2008.

MB/MB