Islamic State militants extended their gains in northern Iraq on Thursday, seizing more towns and strengthening a foothold near the Kurdish region in an offensive that has alarmed the Baghdad government and regional powers.

The advance forced thousands of residents of Iraq's biggest Christian town to flee, fearing they would be subjected to the same demands the Sunni militants made in other captured areas - leave, convert to Islam or face death.

The Islamic State, which is considered more extreme than al- Qaeda, sees Iraq's majority Shi'ites and minorities such as Christians and Yazidis, a Kurdish ethno-religious community, as infidels.

In Rome, Pope Francis appealed to world leaders to help end the crisis in northern Iraq after the Islamic State advance forced thousands of Christians to flee.

The militant group said in a statement on its Twitter account that its fighters had seized 15 towns, the strategic Mosul dam on the Tigris River and a military base, in an ongoing offensive that began at the weekend.

Kurdish officials say their forces still control the dam, Iraq's biggest.

On Thursday, two witnesses told Reuters by telephone that Islamic State fighters had hoisted the group's black flag over the dam, which could allow the militants to flood major cities or cut off significant water supplies and electricity.

The Sunni militants inflicted a humiliating defeat on Kurdish forces in the weekend sweep, prompting tens of thousands from the ancient Yazidi community to flee the town of Sinjar for surrounding mountains.

Some of the many thousands trapped by Islamic State fighters on Sinjar mountain have been rescued in the past 24 hours, a spokesman for the UN Office for the Coordination of Humanitarian Affairs said, adding that 200,000 had fled the fighting.

"This is a tragedy of immense proportions, impacting the lives of hundreds of thousands of people," spokesman David Swanson said by telephone.

Many of the displaced people urgently need water, food, shelter and medicine, he said. A spokesman for the UN agency for children said many of the children on the mountain were suffering from dehydration and at least 40 had died.

Yazidis, seen by the Islamic State as "devil worshipers", risk being executed by the Sunni militants seeking to establish an Islamic empire and redraw the map of the Middle East.

In Kirkuk, a strategic oil town in the north, 11 were killed by two car bombs that exploded near a Shi'ite mosque holding displaced people, security and medical sources said.

In other violence, a car bomb in a Shi'ite area of Baghdad killed 14.

Gains by the Islamic State have raised concerns that militants across the Arab world will follow their cue.

At the weekend the Sunni militants seized a border town in Lebanon, though they appear to have mostly withdrawn. -Reuters