Militants battled Iraqi security forces for control of a strategic northern town on Monday, prompting half the area's population to flee, as Washington weighed drone strikes against jihadist fighters leading the charge.

US Secretary of State John Kerry said he was open to cooperating with arch-foe Iran to resolve the week-long crisis which has spurred Western governments and the United Nations to move some staff out of Baghdad.

Jihadists of the Islamic State of Iraq and the Levant (ISIL) are said to have killed scores of Iraqi soldiers as they pushed an advance on the capital, including in a "horrifying" massacre that has drawn international condemnation.

In the latest fighting on Monday, Sunni Arab militants took control of several neighbourhoods of Tal Afar, a mainly Shiite Turkmen town between the rebel-held second city of Mosul and the Syrian border, officials and residents said.

Local official Abdulal Abbas said Tal Afar was dealing with "martyrs, wounded, chaos and refugees," and that around 200,000 people -- nearly half the area's population -- had fled.

The town, which forms a Shiite enclave in otherwise Sunni Arab and Kurdish-dominated Nineveh province, had initially held off the offensive that saw fighters led by ISIL seize Mosul -- a city of two million people -- and then a vast swathe of territory north of Baghdad in a matter of days.

- Drones an option -

Kerry said on Monday that drone strikes were an option in combating the offensive, after US President Barack Obama said he was weighing "all options" on how to support the Iraqi government.

Drones might not be the "whole answer," Washington's top diplomat told Yahoo News, "but they may well be one of the options that are important to be able to stem the tide and stop the movement of people who are moving around in open convoys and trucks and terrorising people."

Washington has already deployed an aircraft carrier to the Gulf, but Obama has ruled out a return to Iraq for US soldiers, who left the country at the end of 2011 after a bloody and costly intervention launched in 2003.

The US and Iran have also raised the possibility of working together over the crisis -- with Kerry saying he would be open to cooperating with Tehran, just days after Iranian President Hassan Rouhani said his country may "think about" cooperating with Washington.

Pentagon spokesman Rear Admiral John Kirby said "there is absolutely no intention, no plan to coordinate military activities between the United States and Iran."

But he said there might be security discussions between the two governments on the sidelines of nuclear talks in Vienna this week.

State Department spokeswoman Jen Psaki urged Iran to act "in a non-sectarian way" as it engages in Iraq. Usually, Washington demands that Tehran not intervene at all.

The sweeping unrest has prompted Australia, France and the United States to pull out some diplomatic staff. The United Nations has also moved dozens of its international staff out of Baghdad.

- Government claims progress -

The Iraqi government insists it is making progress in retaking territory from militants, who currently hold most or parts of four provinces north of Baghdad.

It said on Sunday that security forces had killed 279 militants and that soldiers have recaptured towns north of Baghdad.

The toll could not be independently confirmed, and Iraqi officials often tout high numbers of militant deaths while downplaying their own casualties.

As troops began to push back against militants, evidence of brutal violence against members of the security forces emerged.

The US and the UN condemned a massacre in which ISIL militants appear to have killed scores of soldiers around the city of Tikrit, executed dictator Saddam Hussein's hometown.

Photos posted online were said to show jihadists summarily executing dozens of captured members of the security forces in the Tikrit region, with tweets attributed to ISIL claiming they had killed 1,700 in all.

The photos and the claims could not be independently verified.

"The claim ... is horrifying and a true depiction of the bloodlust that these terrorists represent," Psaki said.

UN human rights chief Navi Pillay said "this apparently systematic series of cold-blooded executions... almost certainly amounts to war crimes."

The international outcry came as the offensive which the militants launched in Mosul on June 9 entered its second week.

Iraqi forces performed poorly early on, abandoning vehicles and positions and discarding their uniforms, with militants reaching within less than 100 kilometres (60 miles) of Baghdad.

The embattled security forces, which have done better in recent days, will be joined by a flood of volunteers after a call to arms from top Shiite cleric Grand Ayatollah Ali al-Sistani, but a recruitment centre came under attack on Sunday, leaving six people dead.

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