Families who lost sons, fathers and husbands in the twin conflicts have expressed disgust at the revelation they were targeted.
The Royal British Legion has dropped the News of the World as its campaign partner saying it was shocked 'shocked to the core' by hacking claims.
Claims the newspaper targeted the families of dead servicemen is the latest shocking twist in a week of jaw-dropping revelations which get both more incredible and immoral by the day.
In recent days the News of the World has been accused of targeting:
The families of the two girls murdered by Ian Huntley - Holly Wells and Jessica Chapman
Milly Dowler, a 13-year-old schoolgirl abducted and murdered by Levi Bellfied
Sara Payne, mother of eight-year-old Sarah who was murdered in 2000
The family of abducted toddler Madeline McCann
And there are claims the newspaper routinely paid serving police officers for information.
Jim Gill, stepfather of Second Lieutenant Richard Shearer of the 1st Battalion, Staffordshire Regiment, who was killed in Iraq in July 2005 by a roadside bomb, said the family had long suspected their phones had been hacked.
He added: “It is very distressing. The terrible thing is that we're not surprised by it.
“It is distressing for all the people who have been hacked, especially the people who are going through grief. We thought the phones may be being listened to but we did not think it was the press.”
A senior source at the Ministry of Defence said: “We’re aware of these allegations and are frankly appalled.
“These people have lost loved ones serving the country and it beggars belief that they should have their private lives raked over so callously.
“It would be the most disgusting and sickening intrusion.”
The revelations are expected to cripple sales of the newspaper on Sunday as internet campaigns to boycott the News of the World gather pace.
The list of major advertisers now pulling out of doing business with the News of the World include Ford, Procter & Gamble, O2, Vauxhall, Butlins and Virgin Holidays.
NewsCorp and BSkyB share prices slumped, wiping £600million off the Murdoch family fortune, yesterday.
But today Rebekah Brooks - the editor of the News of the World at the time phone hacking was endemic - said she was out of the country when the paper ran the story referring to Milly Dowler's voicemail.
It is also being claimed she was away in the two weeks following the Soham murders.
Mrs Brooks, who is now chief executive of News International, has been appointed by Rupert Murdoch to lead an internal investigation into the phone hacking scandal.
Peta Buscombe, chair of the Press Complaints Commission, said the fact that she was effectively investigating herself 'extraordinary'.
Police today said 'a very high profile figure' and five journalists and senior executives at the paper – could be arrested within days.
James Murdoch, son of media tycoon Rupert, and News International chief executive Rebekah Brooks were accused in Parliament of being ‘part of the criminal underworld’.
Prime Minister David Cameron – a friend of Ms Brooks – has said there will be a public inquiry into the affair.