Prime Minister John Howard expressed cautious optimism earlier on Wednesday after comments by Australia’s Islamic spiritual leader, who is in Iraq, that Mr Wood could be released by his Iraqi captors soon.

Sheikh Taj El Din al-Hilaly told SBS Arabic radio that he had managed to speak for the first time with the kidnappers, who said Mr Wood could be freed unconditionally in 24 hours.

He said he received the news during a phone call from an anonymous man who claimed he represented the kidnappers of Mr Wood.

However he told SBS journalist Majida Abboud-Saab he believes two other Iraqi hostages know too much about their kidnappers to be released.

“He (Sheikh Hilaly) is very convinced and he is optimistic and he is happy about the fact that they have agreed to release Douglas,” she said.

“But he is very upset about the fact that the other two Iraqis are not going to be released.”

Defence Minister Robert Hill said he has not been able to confirm the claim, but the government is still working to verify the information.

Mr Wood, a 63-year-old engineer, was taken hostage more than two weeks ago.

“We would all hope that it’s right but we would also be aware in a situation like this there are always people who may represent things – I don’t mean the sheikh – others who may be representing to him things that are not correct” Mr Howard said.

“But I just have to enter the cautions,” he added. “There is nothing worse than false expectations and false hopes in a situation like this, most particularly and overwhelmingly for the man’s family.”

A spokesman for Sydney’s Muslim community said the sheikh had handed over vital medication to be delivered to Mr Wood’s captors.

Nothing has been heard of Mr Wood’s condition since a May 6 DVD that showed him shaved and bruised and set a 72-hour deadline for Australian troops to be pulled from Iraq.