By Zeeshan Haider and Andrew Quinn
ISLAMABAD, Pakistan (Reuters) - A car bomb ripped through a crowded market killing 90 people in Pakistan's city of Peshawar on Wednesday, just hours after Washington's top diplomat arrived pledging a fresh start in sometimes strained relations.
Wednesday's bomb, the latest urban attack since the army launched a major assault on rural Taliban strongholds two weeks ago, was the deadliest since 2007 when around 140 died at a procession to welcome home former prime minister Benazir Bhutto, who was assassinated just weeks later.
The bomb went off in the busy Peepal Mandi market street in a city that for years served as the headquarters of the Pakistan- and U.S.- backed mujahideen war against the Soviet Union's occupation of Afghanistan.
Although nobody claimed responsibility, suspicion immediately fell on Pakistani Taliban militants who are the target of the army offensive.
The rugged landscape between Afghanistan and Pakistan has become a haven for Taliban militants fighting on both sides of the border as well as many hundreds of al Qaeda operatives and other foreign Islamist insurgents.
Hours after the blast, visiting U.S. Secretary of State Hillary Clinton told a news conference that Washington fully supported Pakistan's battle.
"I want you to know that this fight is not Pakistan's alone," she said.
"So this is our struggle as well and we commend the Pakistani military for their courageous fight and we commit to stand shoulder to shoulder with the Pakistani people in your fight for peace and security.
Sahib Gul, a doctor at Peshawar's main hospital, said the dead from Wednesday's bomb were mostly women and children.
"Several buildings and a mosque have been badly damaged while a fire has engulfed buildings," witness Aqueel-ur-Rehman told Reuters from the market, which mostly deals in groceries and household goods.
Defiant Pakistani Foreign Minister Shah Mehmood Qureshi told a news conference with Clinton that the militants would be crushed.
"We are facing this on a daily basis but the resolve and determination will not be shaken," he said.
Addressing those responsible, he added: "We will not buckle. We will fight you. We will fight you because we want stability and peace in Pakistan."
In the latest fighting in the Waziristan offensive, the military said it had killed 25 militants and captured several training centres and arms caches -- including some hidden in caves.
The army says 264 militants and 33 soldiers have been killed since the offensive started. Independent verification is difficult as foreign reporters are barred from the area and it is dangerous even for Pakistani media.
Pakistani stock market investors have been unnerved by the violence in recent weeks and the main index closed down 0.69 percent lower at 9,251.84 points. The rupee was also down at 83.54/59 to the dollar.
Clinton acknowledged that misunderstandings dogged U.S.-Pakistan ties and pledged to refocus the relationship on the "needs of the people" including strengthened economic assistance and development of democratic institutions.
(For a Q+A on U.S.-Pakistan relations, see)
She said the main purpose of her trip was to show Pakistan that Washington was a reliable and dependable partner, and to use her own personal style of outreach to bring that message home to the Pakistani people.
Her visit comes amid widespread Pakistani anger over a recent major U.S. aid bill which, despite tripling assistance to $1.5 billion a year for the next five years, has been bitterly denounced for imposing conditions critics say violate Pakistani sovereignty.
The bill mainly focuses on socio-economic development but also requires Clinton to certify to Congress that Pakistan is cooperating with efforts to combat militant groups and nuclear proliferation, and to ensure civilian government control over the powerful military.
Clinton -- who this week turned 62, the same age as Pakistan itself -- said that she looked forward to bringing the U.S. message directly to the Pakistani people.
"What do people in Pakistan want? Good jobs, good healthcare, good education for our children, energy that is predictable and reliable -- the kinds of everyday needs that are really at the core of what Americans want," she said.
She used the news conference to announce a new $125 million U.S. aid program to bolster Pakistan's flagging energy infrastructure -- a major source of frustration for the population and an example of what Washington is promoting as a new level of popular assistance.
Qureshi said Clinton's message would come through "loud and clear" to the Pakistani people. "Certainly this visit of yours will build bridges and deepen our relationship further," he said.
(Additional reporting by Faris Ali in Peshawar and Kamran Haider in Islambad; Writing by David Fox; Editing by Robert Birsel)
(For more Reuters coverage of Afghanistan and Pakistan, see: http://www.reuters.com/news/globalcoverage/afghanistanpakistan)