BAGHDAD/WASHINGTON (Reuters) - Saddam Hussein (news - web sites) rejected an ultimatum to quit Iraq (news - web sites) and vowed on Tuesday to fight a U.S.-led invasion that could start in little more than a day.

President Bush (news - web sites) gave the Iraqi leader just 48 hours -- until early Thursday Baghdad time -- to flee or he would unleash the U.S. and British forces massed on the frontier.

The response never seemed in doubt and 12 hours later state television showed Saddam making a rare appearance in military uniform. It quoted him telling his cabinet he would emerge the victor from a war that has opened a raw schism in world opinion.

"The meeting stressed that Iraq and all its sons were fully ready to confront the invading aggressors and repel them," the television announcer said, reading a cabinet statement.

"The wives and mothers of those Americans who will fight us will weep blood, not tears," Saddam's elder son Uday said.

"The tyrant will soon be gone," Bush said earlier in a brisk, 13-minute address from the White House on Monday night.

He urged Iraq's soldiers to surrender rather than be killed by the high-tech firepower of 280,000 U.S. and British troops, who are making final preparations for an invasion.

U.N. weapons inspectors left Iraq on Tuesday, effectively ending a period of failed diplomacy. French and Greek envoys also pulled out leaving few diplomats in Baghdad.

BUSH DEFIES U.N. CRITICS

Defying many U.N. allies and dividing public opinion, Bush defended his right to wage what he portrayed as a pre-emptive war against September 11-style terrorism. He promised to bring prosperity and democracy to the Iraqi people.

"The United Nations (news - web sites) Security Council has not lived up to its responsibilities, so we will rise to ours," he said.

"Saddam Hussein and his sons must leave Iraq within 48 hours. Their failure to do so will result in military conflict, commenced at a time of our choosing," Bush said, warning Americans of a threat of terrorist reprisals and putting the nation on its second-highest level of alert.

The deadline is 4:15 a.m. Iraqi time (0115 GMT) on Thursday.

Nations around the world were divided over Bush's strategy and governments struggled to cope with internal splits in the wake of widespread popular protests against waging war.

British Prime Minister Tony Blair (news - web sites), Bush's closest ally, battled in parliament to subdue a rebellion among his own Labour supporters that has seen three government ministers resign.

"It will determine the pattern of international politics for the next generation," Blair said of the Iraq issue.

French President Jacques Chirac led those world leaders who accused the United States of being reckless with the unrivalled power it has enjoyed since the Cold War and of flouting the will of the United Nations in a way that may fuel global instability.

Washington was putting "force before justice," Chirac said.

"There is no justification for a unilateral decision to resort to force," he insisted, saying Iraq did not represent an immediate threat and that U.N. disarmament had been working.

INSPECTORS PULL OUT

With war looking inevitable, the United Nations drew down the curtain on 12 years of frustrated efforts since the 1991 Gulf War (news - web sites) to ensure Iraq has no chemical, biological or nuclear arms. U.N. inspectors flew to Cyprus from Baghdad.

"We're sad that we're leaving. We know that we could have stayed longer to finish our job," one of them said.

In Baghdad, Iraqis were fearful but resigned to their third war in just over two decades. Impoverished by U.N. sanctions since 1990, people stocked up on food and other essentials.

Pregnant women crowded maternity wards asking for Caesarian surgery rather than face giving birth in crowded bomb shelters.

To the south, in the Kuwaiti desert, U.S. and British troops packed up tents and prepared kit for an invasion they expect within days, probably preceded by a massive bombardment.

"Finally we're going somewhere. We're going to war," said Sergeant Robert Vennebush, 25, with an army engineering unit.

Global financial markets took heart from the view that a quick U.S. victory would end months of uncertainty hanging over the world's biggest oil-producing region. Brent oil prices dropped 10 percent and stock markets jumped after Bush's speech.

"Markets are truly backing the view that it's going to be a short, sharp, successful affair," said Michael Wilson of fund manager Ausbil Dexia in Sydney.

Bush said Iraq might provide weapons of mass destruction to groups like Osama bin Laden (news - web sites)'s al Qaeda Islamist radicals, whom he blames for the September 11 attacks and who were the object of the U.S. campaign against the Afghan Taliban 18 months ago.

Not to pre-empt that would be "suicide," Bush said, scolding France -- though not by name -- for lacking America's "resolve."

WORLD OPINION DIVIDED

Many Western leaders share Bush's skepticism of Iraqi denials of having banned weapons and his distaste for Saddam's record over three decades. But some disagree about the extent of his possible sponsorship of terrorists and argue that war may simply fuel more violence in the Middle East and beyond.

German Chancellor Gerhard Schroeder said war meant "certain death to thousands of innocent men, women and children."

Chinese Premier Wen Jiabao called for peace and in Moscow parliament delayed a vote on a U.S.-Russian arms control treaty in irritation at Washington ignoring Russia's views on Iraq.

Bush supporters like Britain, Spain, Italy accuse doubters like France, Germany and Canada of repeating the mistakes of those who appeased Adolf Hitler in the 1930s.

Some Muslim states said war would inflame just the sort of violence that Bush said he was seeking to prevent.

In Indonesia, the world's most populous Muslim nation, a moderate Islamic leader called Bush and Blair "war criminals."

Japan expressed support. Australia offered troops, in spite of popular opposition that saw "No War" daubed in blood red letters on the landmark roof of the Sydney Opera House.

Turkey, a NATO (news - web sites) ally, appeared to be softening its resistance to helping U.S. forces, though possibly only by offering airspace to planes and missiles rather than grant requests for U.S. troops to invade northern Iraq from Turkish bases.

Few soldiers expect the Iraqis to put up much of a fight. But they are ready for bitter guerrilla warfare from Saddam loyalists with little to lose -- and for chemical attacks.

Israelis, targeted by Iraqi Scud missiles in the 1991 Gulf War, began sealing rooms against chemical or biological warfare.

Terrified of reprisals, thousands of Iraqi Kurds fled the city of Arbil in their northern region beyond Saddam's control.