By Isabel Coles

ARBIL Iraq (Reuters) - Islamist militants surged across northern Iraq toward the capital of the Kurdish region on Thursday, sending tens of thousands of Christians fleeing for their lives, in an offensive that prompted talk of Western military action.

Reuters photographs showed what appeared to be Islamic State fighters controlling a checkpoint at the border area of the Kurdish semi-autonomous region, little over 30 minutes' drive from Arbil, a city of 1.5 million that is headquarters of the Kurdish regional government and many businesses.

The fighters had raised the movement's black flag over the guard post. However, a Kurdish security official denied that the militants were in control of the Khazer checkpoint, and the regional government said its forces were advancing and would "defeat the terrorists," urging people to stay calm.

In Washington, a senior U.S. official said the Obama administration had approved military air drops of humanitarian supplies to help trapped religious minorities in Iraq and they could start at any time.

U.S. officials, confirming a New York Times report, said President Barack Obama was also weighing carrying out the first U.S. airstrikes in Iraq since a 2011 pullout of troops.

White House spokesman Josh Earnest said any U.S. military action would be "very limited in scope" and tied to Iraqi political reforms, adding: "There are no American military solutions to the problems in Iraq."

News reports that the United States has struck targets in Iraq are not accurate, a Pentagon spokesman said on Thursday, as Islamist militants advanced across northern Iraq.

"Press reports that U.S. has conducted airstrikes in Iraq completely false," Rear Admiral John Kirby said in a post on his Twitter feed. "No such action taken."

Sunni militants captured Iraq's biggest Christian town, Qaraqosh, prompting many residents 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, 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.

U.N. Secretary-General Ban Ki-moon said he was "deeply appalled" by reports of attacks by Islamic State militants in Iraq and called on the international community to help the country's government.

The U.N. Security Council was due to hold an emergency meeting on the crisis in Iraq. France had called for the meeting to "counter the terrorist threat in Iraq."

French President Francois Hollande's office said after he spoke by telephone with Kurdistan president Masoud Barzani that Paris was prepared to support forces engaged in the defence of Iraqi Kurdistan. It did not say how.

Shares in energy companies operating in Iraqi Kurdistan plummeted on news of the sweeping Islamist advance toward oilfields in the region.

U.S. oil major Chevron Corp said it was evacuating staff in light of the militants' advance, and an industry source said Exxon Mobil Corp was also pulling out staff, although the company declined to comment on security concerns.

The Islamic State 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 offensive that began during 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. A Kurdish government security adviser said its forces had staged a tactical withdrawal.

BOMBINGS ACROSS IRAQ

Facebook and Twitter were blocked in Kurdistan on Thursday, initially for 24 hours. A government official told Reuters the reason was to prevent militants from gathering any information about the movement of Kurdish forces from social media, and to stop rumours and panic.

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