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The blast, believed to be caused by a bomb, destroyed the shop and levelled two adjacent shops in a town located in Diyala province, the source told Xinhua on condition of anonymity.
Three children and one woman were among the wounded, he added.
Iraqi security forces have cordoned off the area and carried out investigations.
Diyala, which borders Iran, has been plagued by violence since the 2003 U.S.-led invasion. Iraq has seen an uptick of violence in recent weeks as a result of reignited Sunni-Shia conflict.
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