IRAQI forces have launched a fresh offensive to drive Islamic State fighters out of Tikrit, home town of executed dictator Saddam Hussein, while the militants warned they would attack Americans "in any place".

In Geneva, the United Nations refugee agency announced a major aid operation to get supplies to more than half a million people displaced by fighting in northern Iraq.

Buoyed by an operation to recapture a strategic dam from the jihadists after two months of setbacks, Iraqi army units backed by Shi'ite militias fought their way towards the centre of Tikrit, 80 miles north of Baghdad, which is a stronghold of the Sunni Muslim minority.

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Sunni Muslim fighters led by the Islamic State swept through much of northern and western Iraq in June, capturing the Sunni cities of Tikrit and Mosul as well as the Mosul dam, a fragile structure which controls water and power supplies to millions of people down the Tigris river valley.

However, on Monday fighters from Iraq's Kurdish autonomous region said they had regained control of the hydro electric dam with the help of US air strikes. US President Barack Obama also announced the dam had been retaken.

An Iraqi major said fierce fighting was underway near Tikrit's main hospital and added: "Helicopters are pounding the bases of the terrorists to prevent them from regrouping."

As well as a push from the south, Iraqi forces were advancing slowly from the west due to land mines and roadside bombs planted by the militants.

The Islamic State has concentrated on taking territory for its self-proclaimed caliphate both in Syria, where it is also fighting the forces of President Bashar al-Assad, and across the border in Iraq.

Unlike al Qaeda, the terrorist movement from which it split, it has so far steered clear of attacking Western targets in or outside the region.

However, a video posted on the Internet warned Americans, in English, that "we will drown all of you in blood" if US air strikes hit Islamic State fighters.