Again some confusion, I'm afraid. It was Etzel commander David Razi'el who was killed in Iraq, whence he had gone on a secret mission for the British Army during the Rashid Ali revolt of 1941. If I am not mistaken, his car was strafed near the British Air Force base in Habbaniyya.
Etzel had declared a cease-fire after the outbreak of World War II and sought to co-operate with the British against Hitler, just like the Yishuv from which it had seceded.
Avraham Stern, however, was murdered in 1942 after a large-scale manhunt in Tel Aviv, and not by the British Army, but by the Palestine Police - the officers in charge were Morton and Wilkins. I believe Lehi later tried to assassinate Morton as a revenge.