Italian bombing has caught American ship — it sank (9)
I believe the answer is:
lusitania
'ship it sank' is the definition.
(RMS Lusitania sank in 1915)
'italian bombing has caught american' is the wordplay.
'bombing' indicates anagramming the letters.
'has caught' indicates putting letters inside.
'american' becomes 'us' (abbreviation for United States).
'italian' is an anagram of 'litania'.
'litania' going around 'us' is 'LUSITANIA'.
(Other definitions for lusitania that I've seen before include "Ocean liner sunk in World War One" , "area close to Spain" , "part of Iberia" , "part of the Roman Empire" , "Liner sunk by U-boat in 1915" .)