Australia's elite SAS soldiers are ready to swoop into Baghdad to rescue diplomats if the bloody fighting in Iraq's north reaches the capital, Fairfax Media has learnt.

It is also understood that Australia could fly P-3 Orion surveillance plane missions as part of a broader US-led effort to beat back the jihadist forces that have cut a swathe through Iraq's north, though Washington had made no request as of Monday night.

"Should the control of this group be consolidated we are faced with a situation of a terrorist state": Prime Minister Tony Abbott. Credit:Alex Ellinghausen

Fairfax Media understands that the SAS would be deployed if security in Baghdad deteriorated to the extent that staff could not be removed safely without the protection of the special forces.

The Perth-based SAS have been used this way before, notably to evacuate diplomats from East Timor in 1999.