The Iraqi air force has launched airstrikes on militant fighters' positions around the northern cities of Mosul and Tikrit after they threatened to march south to Baghdad.
Footage showed what state TV said was a bombing raid on Iraq's second city. A witness told AFP news agency at leas four airstrikes had been aimed at militants occupying the old palace compound of Saddam Hussein in the former dictator's home town.
Earlier, the Islamic State of Iraq and the Levant (ISIS) paraded American Humvees it had seized from fleeing government security forces in Mosul.
At the White House on Thursday, President Barack Obama said his administration was looking at "all the options" to decide how to help Iraq drive back the Islamist insurgents.
But there is no chance of American boots back on the ground, says Sky News US Correspondent Dominic Waghorn .
ISIS has seized Mosul and Tikrit and fighting has also been reported on the outskirts of Samarra, within 70 miles of the capital. It has previously taken control of Fallujah and parts of Ramadi.
More than 500,000 people have fled the conflict in the Mosul region, with many heading into Kurdish areas in the north.
In Baiji, near Kirkuk, insurgents driving 50 vehicles were reported to have surrounded an oil refinery.
Hundreds of young men were reportedly crowding outside the main army recruiting centre in the capital to sign up and help battle the militants.
Iraqi Foreign Minister Hoshyar Zebari told Sky News that security forces were beginning to push back the insurgents.
"This has really caused very, very serious disruption and it is a setback definitely for Iraqi security forces," he admitted.
But in the north, the Iraqi army has abandoned its bases in Kirkuk, leaving the Kurdish Peshmerga forces to take control of an air base and other posts, according to a Kurdish military spokesman.
Meanwhile, sectarian political dysfunction was blamed for the Shiite-led Baghdad government's failure to secure authorisation to declare a state of emergency.
Only 128 of 325 Iraqi MPs turned up for a special parliamentary session on Thursday, not enough to grant the extra powers sought by Prime Minister Nouri al Maliki.
ISIS, led by Abu Bakr al Baghdadi, wants to create a Sunni state, or caliphate, straddling the border between Iraq and Syria.
In a statement, the group's spokesman Abu Mohammed al Adnani said: "We have a score to settle, for there is an old balance with it (Baghdad), and we must make it even."
Although bombings have stepped up in Baghdad recently, the capital is home to a large Shiite population and would be far harder for the Sunni insurgents to take over.
The ISIS spokesman also said its fighters would grab the southern cities of Karbala and Najaf, home to two of the holiest Shiite shrines.
Shiite regional power Iran's President Hassan Rouhani warned on state television that the country's security forces would combat terrorism which targeted Shiites in Iraq.
British Foreign Secretary William Hague ruled out any military intervention and top NATO officials also said they had no plans to get involved militarily.