A series of bomb attacks on London's transport network has killed more than 30 people and injured about 700 others.
Three explosions on the Underground left 35 dead and two died in a blast on a double decker bus.
Foreign Secretary Jack Straw said the bombings had "the hallmarks of an al-Qaeda-related attack".
Prime Minister Tony Blair promised the "most intense police and security service action to make sure we bring those responsible to justice".
Mr Blair, who had returned to London from the G8 summit in Gleneagles, condemned the terrorists and paid tribute to the stoicism and resilience of the people of London.
"They are trying to use the slaughter of innocent people to cow us, to frighten us out of doing the things that we want to do," he said in a televised statement from Downing Street.
They "should not and they must not succeed," he said.
"We know that these people act in the name of Islam but we also know that the vast and overwhelming majority of Muslims here and abroad are decent and law-abiding people who abhor those who do this every bit as much as we do," he added.
The Queen, who will visit some of those involved in the tragedy on Friday, said she was "deeply shocked" and sent her sympathy to those affected. The union jack flag was flying at half mast over Buckingham Palace.
Further details of the Queen's visit will be announced on Friday morning.
0851 Seven people die in a blast on a train 100 yards from Liverpool Street station
0856 21 people die in a blast on a train between Russell Square and King's Cross stations
0917 Seven people die in blast on a train at Edgware Road station
0947 Two people die in a blast on a number 30 bus at Tavistock Place
US President George Bush told reporters at the G8 Summit in Gleneagles "the war on terror goes on."
Hundreds of thousands of commuters faced difficult journeys home from London on Thursday night after a day of travel chaos.
Many opted to walk while some booked into hotels.
By late afternoon, major routes out of London, including the M25 and M4, were jammed and motorists have been urged not to drive into the centre as many roads are shut.
All London Underground services have been suspended until at least Friday.
Bus services have resumed in central London (Zone One) with diversions in affected areas. Most mainline train stations are open.
Metropolitan Police Deputy Assistant Commissioner Brian Paddick confirmed 35 people had died in the blasts on the Underground.
He said there were 21 confirmed fatalities following the blast at 0856 BST on a Piccadilly Line train in a tunnel between King's Cross and Russell Square.
There were seven confirmed deaths after a blast at 0851 BST 100 yards into a tunnel from Liverpool Street station. The train involved was a Circle Line train.
And at 0917 BST an explosion on another Circle Line train coming into Edgware Road underground station blew a hole through a wall onto another train at an adjoining platform.
Three trains were thought to be involved and there were seven confirmed deaths so far, Mr Paddick said.
He said two had died in the bus blast at 0947 at the junction of Upper Woburn Place and Tavistock Square.
There were also 700 people injured, Mr Paddick said.
Two people died in the bus blast
London Ambulance Service said it had treated 45 patients with serious or critical injuries including burns, amputations, chest and blast injuries and fractured limbs.
In other developments:
- The police set up a casualty bureau number on 0870 1566344
- The officer in charge of policing the G8 summit said many of the 1,500 Metropolitan Police officers in Scotland would be urgently redeployed to London
- Celebrations to mark the homecoming from Singapore of the successful London Olympic bid team were cancelled
- 54 state schools were closed in Westminster
- Mobile phone services across London were jammed with all major networks reporting problems as people tried to contact relatives and friends. A spokeswoman for Vodafone said the emergency services were being given priority.
Mr Paddick confirmed police were looking into whether the bus blast was the work of a suicide bomber.
But, he added: "It could as easily be an explosive device left on the bus as the work of a suicide bomber. We are not able to determine which it was yet."
He said no warning had been given before the blasts and that no-one had yet claimed to be behind them.
BBC security correspondent Frank Gardner said he had been told by Whitehall sources that a "massive intelligence effort" was under way to find the perpetrators of the bombings.
He also said a previously unknown group calling itself the Secret Organisation Group of al-Qaeda of Jihad Organisation in Europe had claimed to be behind the attacks in a statement posted on an Islamist website.
The group's statement said the attacks were revenge for the "massacres" Britain was committing in Iraq and Afghanistan and that the country was now "burning with fear and panic", he added.
Early reports had suggested a power surge could be to blame for explosions on the Underground but this was later discounted.
Between Aldgate East and Liverpool Street tube stations
Between Russell Square and King's Cross tube stations
At Edgware Road tube station
On bus at Tavistock Square