Lahore - Only days after mass shooting of Muslims by an Australian racist in New Zealand, terror struck in Europe on Monday as a gunman opened fire on a tram in the Dutch city of Utrecht.

At least three people were killed in the attack and another five wounded – three of them seriously, authorities said.

Authorities in the Neitherlands were hunting for the suspected shooter, said to be a 37-year-old Turkey born man named as Gokmen Tanis, according to the European media reports.

Police issued a CCTV image of the suspect to help catch him but warned people not to approach him themselves.

The security threat level was raised to 5, the highest, and schools had been closed and security increased at the public places as counter-terrorism police were on their toes to find the gunman.

The attack happened at about 10:45 local time (09:45 GMT). One witness told local media that "a man started shooting wildly".

Another witness told Dutch public broadcaster NOS that he had helped an injured woman after the tram came to a stop.

"I looked behind me and saw someone lying there behind the tram," he said. "People got out of their cars... and they started to lift her up.

"I helped to pull her out and then I saw a gunman run towards us, with his gun raised," he said. "I heard people yell 'Shooter! Shooter!' and I started to run."

"We cannot exclude a terrorist motive," Dutch anti-terrorism co-ordinator Pieter-Jaap Aalbersberg told a news conference on Monday.

Counter-terrorism police earlier surrounded a house near the 24 Oktoberplein junction, where the tram attack took place, but no arrests appear to have been made.

Utrecht University had closed all of its buildings and trains were not allowed to run into the city's central station.

Paramilitary police had been sent to airports and mosques amid increased security concerns.

Utrecht, the Netherlands' fourth largest city, has a population of about 340,000. Crime levels are low and gun killings are rare, which is the case for much of the country.

A local businessman said that the suspect had previously fought in Russia's republic of Chechnya. "He was arrested because of his connections with [IS] but released later," he said.

Jihadist groups, including those aligned with the Islamic State (IS) group, have long operated in the region.

Prime Minister Mark Rutte said the country had been "jolted by an attack", which he described as "deeply disturbing".

The Netherlands' King Willem-Alexander and Queen Maxima said they feel "intensely" for the victims of the tram shooting and condemned the violence as "absolutely unacceptable."

"Let us stand together for a community in which people feel safe and in which the freedom and tolerance are of utmost importance," they said in a statement.