Baghdad: The Islamic State militant group that has seized large parts of Iraq and drawn the first American air strikes since the end of the occupation in 2011 has warned the United States it will attack Americans "in any place" if the raids hit its fighters.

The video, which shows a photograph of an American who was beheaded during the US occupation of Iraq and victims of snipers, featured a statement which said in English "we will drown all of you in blood".

Peshmerga fighters inspect the remains of a car that belonged to militants in Baqufa, north of Mosul. Credit:AFP

Islamic State, formerly known as the Islamic State of Iraq and the Levant, has so far focused on seizing land in Iraq and Syria for its self-proclaimed "caliphate", not spectacular attacks on Western targets.

The latest advance by the militants sent tens of thousands of members of the Yazidi ethnic minority and Christians fleeing for their lives and alarmed the Baghdad government and its Western allies.