Iraqi politicians led by cleric Moqtada al-Sadr and Prime Minister Haider al-Abadi say they have created an alliance that would give them a majority bloc in the new parliament after four months of political uncertainty.

Key points: Alliance of mainly Shiite Muslim politicians, with other religious minorities included

Alliance of mainly Shiite Muslim politicians, with other religious minorities included Mr Sadr has left out all Kurdish groups and Iran supported runner-up Hadi al-Ameri

Mr Sadr has left out all Kurdish groups and Iran supported runner-up Hadi al-Ameri The alliance comes amid building protests over poor public services and corruption

The new government is tasked with rebuilding the country after a three-year war with Islamic State militants and balancing relations between Iraq's two biggest allies: arch-rivals Iran and the United States.

The alliance announced on Sunday includes 177 politicians from 16 electoral lists, a document published by the state news agency showed.

It is now in the lead position to form a government.

Iraqis voted in May in their first parliamentary election since the defeat of Islamic State's self-declared caliphate, but a contentious recount process delayed the announcement of final results until last month.

Uncertainty over the composition of the new government has raised tensions at a time when public impatience is growing over poor basic services, high unemployment and the slow pace of rebuilding after the war with Islamic State.

The recount delayed the process by three months but showed little had changed from the initial results, with Mr al-Sadr, a populist Shiite cleric, retaining his lead of 54 seats.

Mr Abadi's bloc remained third with 42.

Iraq's Parliament contains 329 seats and is set to convene on Monday, when it will elect a speaker and launch the government formation process.

The new alliance includes the blocs of Vice-President Ayad Allawi and Shiite Muslim cleric Ammar al-Hakim, as well as several Sunni Muslim politicians and ones representing Turkmen, Yazidi, Mandaean and Christian minorities.

It does not include Kurdish groups.

Since Saddam Hussein was toppled in a 2003 US invasion, power has been shared among Iraq's three largest ethnic-sectarian components.

Sorry, this video has expired Cleric Moqtadr al-Sadr's alliance with communists and secular Iraqis fiercely opposes any foreign interference in Iraq. ( ABC News )

The current prime minister is a Shiite Arab, the speaker of parliament a Sunni Arab and the president a Kurd.

Also absent is a political bloc led by militia commander Hadi al-Ameri made up of Shiite paramilitary groups that came second with 48 seats and that of former prime minister Nuri al-Maliki, who came in fifth with 25.

Mr Ameri and Mr Maliki are Iran's two most prominent allies in Iraq.

The past few days have seen Mr Sadr and Mr Abadi on one side racing to form a majority before Mr Ameri and Mr Maliki were able to do so.

Politicians allied with Mr Ameri and Mr Maliki have suggested the announced majority might fall apart and hinted at imminent defections to their camp.

Alliance comes amid ongoing protests

Protesters flee as security forces disperse them from the provincial council building on Sunday. ( AP: Nabil al-Jurani )

The alliance comes amid growing unrest in southern Iraqi cities over poor public services and corruption.

Police had to use tear gas to disperse around 150 protesters at the main entrance to Iraq's giant Nahr Bin Omar oilfield on Sunday.

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On Friday, hundreds of Iraqi protesters stoned and tried to break into the provincial government headquarters in the southern oil hub of Basra demanding better public services and an end to pervasive corruption.

Around 3,000 people gathered there again on Sunday and set fire to tyres outside.

Protesters threatened to break into the field if the government did not respond to their demands to improve basic services and address their complaints over Basra's drinking water, which residents say is undrinkable due to high salt levels.

"We will not allow the oilfield to operate unless we get clean water. No services, no jobs and now no clean water. We are fed up," said Hassan Ali, a protest organiser.

Oil exports from Basra account for more than 95 per cent of Iraq's state revenues.

Any potential disruptions to production could severely impact Iraq's limping economy.

Reuters