BAGHDAD -- Until now, many Iraqis had seemed in denial about the prospect of war. No longer. Baghdad is beating to a different rhythm in the final hours before the seemingly inevitable U.S.-led onslaught starts.

After U.S. President George W. Bush set Monday as the final day for UN diplomacy to disarm Baghdad, even those who were skeptical before are panicking now.

Realizing that war is very near, Iraqis are racing against time to get what they need for the dark days ahead.

Jittery residents are rushing to stock up on essential goods they think will help them. Long queues of cars, waiting at petrol stations round the clock, are clogging the streets.

As if to reflect the ominous mood overwhelming Baghdadis, the city is also enveloped in slate gray cloud.

"It looks we're in the last hour before the war. The mood of war is everywhere. It is all very depressing and sad. We just don't know what to do," said Souad Saleh, 42, a housewife.

Mosques are joining the fight against the United States and Britain. Clerics said they would be centers for "fighting the evil enemy while receiving volunteers for jihad (holy war)".

They would also provide medical treatment and food supplies, they added.

Through 25 years of intermittent wars and conflict, Iraqis have somehow managed to cope with their hardships. But the strain of the war now looming is etched on people's faces.

Until now, journalists have often been approached by Iraqis for news to reassure them there would be no war. But as bombardment and invasion appear close, they seek reassurance that missiles and bombers will not target civilian areas -- and that war will be short.

"This is a miserable life. We spent our whole life shopping for wars or hiding from bombs," said Ahmed, a driver.

Most people seem resigned to God's will. "It is all in the hands of God. What is written by God will happen. What can we do?" Said Iman Kassem, 46, shopping at a market for canned food.

On the streets of Baghdad, jewelers are emptying their shops of gold. Shopkeepers are also busy, taking home as much as they can of their stock amid a pervasive fear that war will trigger anarchy and looting.

"I try to take as much as I can home. This is all I have. I cannot move everything. I know I will have to sacrifice the rest," said Khalaf. ******** Booming Trade in Essentials *********

At the same time, women are selling their jewelry to build up a stock of cash in case they need to flee.

Paradoxically, economic activity has picked up from the normally sluggish level of this sanctions-hit country as a small boom in war necessities takes off.

The war trade is in candles, torches and batteries, kerosene lamps and diesel-powered electricity generators.

The expectation of the capital's citizens -- born of bitter experience -- is there will be no electricity and there could be a severe shortage of water.

The country of 24 million, once a sophisticated society underpinned by wealth from $20 billion a year in oil sales, was heavily bombed in the 1991 Persian Gulf War. Before that, it lived through the 1980-88 War with Iran.

Some people have already bought large water storage tanks, Reuters said.

Another brisk trade has built up around illicit handguns, although those thought to be loyal to the Iraqi government have been issued with guns, including automatic weapons. Authorities on Sunday distributed more guns to Iraqis to fight invaders.

Many ordinary citizens are arming themselves privately as some sort of protection against the chaos they fear may follow if the government of President Saddam Hussein were to fall.

But perhaps the most lucrative by-product of the emergency is the trade in exit visas and the business of getting those Iraqis who wish to flee out of the country.

Prices are going up as war fever rises. A ride to Jordan, which until two days ago cost $350, is now $600.

It is not only adults who are conscious of war coming. It is on children's minds too.

"Before he went to school my 10-year-old son asked me if Bush will attack today," said Ibrahim Khalaf, 42, who runs a shoe shop in Baghdad. "This is a question he asks often but after last night's news he heard us talking and this is the first thing he asked this morning. War has become the obsession of our children."

The majority of Iraqis, who long ago learned to live without the luxuries they once had, say their main fear is about the effect of bombardment on their children.

"Our children get terrified when they hear thunderstorms so imagine what will happen to them when they hear the pounding of American bombers," said a woman who did not give her name. "I don't know what to do with my children when the bombing starts. They will be terrorized," added Mona Shahed. "Only God knows what will happen to us. We have nobody but Him."