A suicide attack on an Air Force bus killed eight people yesterday as security forces said they wiped out up to 70 militants in northwest Pakistan, fuelling talk President Pervez Musharraf would invoke emergency powers to put off elections.

Nuclear-armed Pakistan is going through a period of intense uncertainty in the run up to a vote due in January that is supposed to transform the country into a civilian-led democracy. ?With reference to extremists and terrorists, it's a bad situation,? said Javed Iqbal Cheema, head of the Interior Ministry's Crisis Management Cell. ?It's a very serious threat to Pakistan's internal security.?

The Supreme Court added to tensions yesterday by dragging out hearings on whether US ally General Musharraf was eligible to have stood for re-election while still army chief in a vote in parliament that he won easily early last month.

The Karachi stock exchange's benchmark index dropped nearly 3 % yesterday, compounding declines earlier this week as investors turned tail in a market that is still 38 % up since the start of the year.

Before the market opened, a suicide bomber rammed a bus and killed eight personnel on their way to an air base in Sargodha in the central province of Punjab. Police said they had found the head of the bomber, and circled blood stains on the road with white chalk, while the handlebars of a motorbike used by the attacker lay on the tarmac.

Separately, troops killed up to 70 militants as fighting flared in Swat valley in North West Frontier Province, where more than 180 people have died since last week as the military battles a pro-Taliban movement seeking to impose strict Islamic law.

The latest violence coincided with a visit by Admiral William Fallon, commander of US Central Command, for talks with the Pakistani military leadership. Nearly 800 people have been killed in militant-linked violence and there have been more than 22 suicide attacks in the four months since Pakistani commandos stormed the Red Mosque in the capital, Islamabad, to crush a Taliban-style movement.

Heightened apprehensions

Al Qaeda leaders Osama bin Laden and Ayman al-Zawahri, in audio and video tapes released in September, exhorted followers to wage war on Musharraf and Pakistan's security forces.

Yet investors have been more worried about the Supreme Court destabilising Musharraf, who came to power in a coup eight years ago, than the burgeoning militant threat.

The court said it will adjourn after Friday's session until Nov. 12 ? just three days before Musharraf's present term expires, with parliament also coming to the end of its term.

Constitutional experts say he can carry on as president after Nov. 15, but doubts over his position and how he will react if the ruling goes against him have heightened apprehensions. ?This bench will not be intimidated by any threats,? Justice Javed Iqbal said, after anti-government lawyers noted warnings issued by ministers that authoritarian measures could follow any adverse ruling.

?Nobody should think that the court has been taken hostage. Everything will happen according to the law and the constitution,? said Iqbal, who heads the 11-member bench. Most analysts and foreign diplomats doubt whether the decision will go against Musharraf, and reckon the judges will fudge the ruling, possibly by binding the president to seek a fresh endorsement from the next parliament.

Prime assassination candidates

A Western diplomat said that in the unlikely event the court refuses to uphold Musharraf's re-election victory ?all bets are off as to how Musharraf conducts himself?. Musharraf has promised he will quit the army if he gets a second term, and says he is committed to holding elections.

As part of a transition to civilian-led democracy he allowed opposition leader and former prime minister Benazir Bhutto to return from self-imposed exile without fear of being prosecuted for old corruption charges she says were politically motivated.

The government is determined not to permit back Nawaz Sharif, the prime minister Musharraf ousted. Sharif was put on a flight to Saudi Arabia when he tried to end his exile in September, and diplomats say that means the vote won't be fair.

Bhutto flew to Dubai on Thursday to see her family, a day after she put off the trip citing fears Musharraf could impose an emergency. A spokesman said she will be gone up to four days. The stand taken by Musharraf and Bhutto against the militancy swamping Pakistan has made them prime assassination candidates.

Seven people were killed in a suicide attack on Tuesday less than a kilometre from Mushar-raf's army residence in the garrison city of Rawalpindi, which neighbours Islamabad. A suicide bomb attack in Karachi killed 139 people at a procession on Oct. 19 to mark Bhutto's return.

Simon CAMERON-MOORE