Angry mobs attacked the offices of Qatar Airways

Government offices, schools, colleges and businesses stayed closed and the national flag flew at half-mast on public buildings.

A curfew in the capital, Kathmandu, imposed after violent protests on Wednesday, is still in force.

Two people were killed in the violence and the king has appealed for calm.

The authorities allowed a break in the curfew on Thursday so that Kathmandu residents could leave their homes to stock up on food and other essential supplies.

Others surveyed the damage caused by Wednesday's riots which left the streets littered with broken glass and burning tyres.

Public tranport stayed off the roads and radio and television stations played patriotic and religious music.

The Nepalese government has announced compensation of $14,000 for the families of each victim.

Do not let the tragic killing of 12 citizens in Iraq weaken the age-old fraternal ties, unity and mutual tolerance that exist amongst the Nepalese people King Gyanendra Nepal shocked by murders Government blamed for violence

The BBC's Sushil Sharma in Kathmandu says the situation is still tense.

There were reports of sporadic outbreaks of violence in other parts of the country.

Nepal's king and the prime minister have appealed for calm.

On Wednesday, angry crowds attacked the main mosque in Kathmandu and the offices of some Middle Eastern airlines.

Correspondents say it is the first time in living memory that the Muslim minority has been targeted in Nepal.

Thousands of angry demonstrators took to the streets of Kathmandu on Wednesday, with the security forces struggling to control the situation.

Riot police used batons and teargas to push back an angry mob which attacked the Jama mosque in central Kathmandu.

Protesters stoned the labour department building in Kathmandu, shattering windows and damaging equipment.

Many blamed the government for doing little to free the hostages and there have been calls for the prime minister to step down.

Families devastated

The government rejected the criticism and has pressed the international community to hunt down the killers.

The government did not do enough to get their release Sudarshan Khadka Victim's brother South Asia's 'agents of doom'

The families of the 12 victims are grief-stricken and in shock.

"The government did not do enough to get their release," said Sudharshan Khadka, whose brother Ramesh was one of the victims.

The government said it would take action against agencies illegally sending people to Iraq.

Nepal, one of the poorest countries in the world, has banned its citizens from going to Iraq, despite the relatively well-paid jobs there.

The militants said the 12 Nepalis had been killed because they "came from their country to fight the Muslims and to serve the Jews and the Christians".

"Do not let the tragic killing of 12 citizens in Iraq weaken the age-old fraternal ties, unity and mutual tolerance that exist amongst the Nepalese people," King Gyanendra said in a message to the nation.