Gilgamesh Nabeel, Ammar Al Shamary and Luigi Serenelli

Special for USA TODAY

BAGHDAD — Al-Qaeda-inspired militants have seized the northern Iraqi city of Tikrit — hometown of former leader Saddam Hussein — in a move that represents the second major advance this week for rebel forces in an escalating insurgency that has left the government on the defensive.

Witnesses described hearing heavy gunfire from different parts of the city Wednesday afternoon before hundreds of pickups equipped with weapons appeared on city streets.

"The police didn't fight at all and withdrew one-by-one," said Hassan al Obaidi, 45, who works in an oil refinery in Tikrit.

In Tikrit, like Mosul, militants freed prisoners and took control of government buildings. Thousands of residents fled the city, adding to the hundreds of thousands who have left Mosul in the past 24 hours.

"I left the city with my family to stay in a village after I saw everything crumbling," said Mahmoud Al Samaraie, 38, a shop owner from Tikrit, about 100 miles from Baghdad. "I don't know for how long I will stay there. There is no electricity and no clean water. I fled just to protect my children. They were very scared because of all of this."

The offensive — which the Islamic State of Iraq and Levant (ISIL), an al-Qaeda splinter group, started Monday — is part of an attempt to create an Islamic territory including Iraq and Syria.

The group has taken control of all of Iraq's Nineveh province, as well as parts of Anbar to the west, Kirkuk to the southeast and Salaheddin to the south.

ISIL militants don't pose an imminent threat to attack the United States but their growing strength will further destabilize the Middle East and could affect American allies there, said Army Col. Steve Warren, a Pentagon spokesman. He condemned the ISIL for attacking Mosul and Tikrit.

U.S. officials, in consultation with the Iraqi government, are monitoring the situation in Iraq with concern, Warren said. The Pentagon is aware of reports that U.S. military equipment has fallen into the hands of militants, but he did not confirm that, saying "the situation remains fluid and the situation on the ground remains murky."

The Pentagon has supplied the Iraqi military with Apache attack helicopters, missiles, rockets, tank rounds, small arms and ammunition. U.S. Special Operations personnel are also training Iraqi security forces in a counter-terrorism exercise in Jordan.

ISIL fighters pose "a severe challenge" to Iraqi security forces, Warren said. But it is up to them, he said, "to step up to fight and defeat this enemy.

The Iraqi government is scheduled to meet Thursday to decide on whether to declare a state of emergency requested by Prime Minister Nouri al-Maliki. That would give the Iraqi leader broader powers to fight the militants than he has had in the past year. In that time, the country has experienced a spike in sectarian violence not seen since 2006 when an average of 2,000 people died every month. Almost 9,000 people were killed in 2013, according to the United Nations. An estimated 4,000 died in the first four months of this year.

Meanwhile, in Mosul, witnesses fleeing the ISIL fighters who took control of the city Tuesday were bitter and confused about the collapse of the Iraqi military's defenses. Many believed the army's quick exit and lack of preparedness proved the government had abandoned hope of exercising its authority in Mosul even before the insurgents launched their assault.

"I think Mosul was given up according to a predetermined plan," said Mohammed Munaf, a resident who fled his neighborhood on the eastern side of Mosul when the fighting began. "There was no resistance."

Residents say ISIL has had de facto control for months and the only difference is that now it is official. The militants have been running extortion rackets in Mosul for years — collecting fees in exchange for protection from local merchants who had little choice but to pay, said Munaf.

"Many sleeper cells are present in the city," he said. "Taxes are imposed on well-known merchants, pharmacists, doctors and contractors. They assassinate people. Their work is mafia-like, well organized."

Middle East analyst Guido Steinberg of the German Institute for International and Security Affairs in Berlin said ISIL had been using Mosul as a base for expansion in the region since it formed as a chapter of al-Qaeda a decade ago. The two terrorist organizations split in February over internal squabbles. Now, ISIL uses money raised in Mosul to fund its campaign against President Bashar Assad in Syria.

"They have been strong in Mosul for years already," said Steinberg. "It has been one of the strongholds of al-Qaeda in Iraq."

Steinberg doesn't believe ISIL has sufficient fighters to occupy the city permanently. But he said the capture of Iraq's strategically important, second-largest city is a major symbolic victory that is a direct challenge to the legitimacy of embattled Prime Minister al-Maliki.

"It shows how confident they (the fighters) have become in recent weeks," he said.

Those who remain in Mosul now express fear of what's coming — and the government's expected push to dislodge them.

"Mosul is a great city, a city of peace, art and science, I hope (Prime Minister) al-Maliki takes that into consideration," said Mohmood Faris, a doctor who refused to leave Mosul. "I hope all this ends soon so our city can be saved. If it will be bombed, it would be the biggest catastrophe in this century."

Faris said that some people were afraid of the militants at first but then welcomed them. "The city was not looted," he said.

Meanwhile, hundreds of thousands were trying to enter Kurdish territory but denied entry and looking for safety elsewhere.

One man who asked that he be identified only by his initials, O.J., to protect his safety, said that he took nothing but his passport and laptop as he headed toward Dohuk, a northern semiautonomous governorate near the border with Kurdistan.

Contributing: Tom Vanden Brook in Washington. Luigi Serenelli reported from Berlin.