US President Barack Obama said key Nato allies stood ready to join in military action to defeat Islamic State militants in Iraq as he vowed to 'take out' the leaders of a movement he said was a major threat to the West.

Obama said the Washington would hunt down and dismantle the organisation, which has seized swathes of Iraq and Syria, in the same way it had tackled al Qaeda since the Sept. 11 attacks on the United States and was doing to al-Shabaab in Somalia.

"Key Nato allies stand ready to confront this terrorist threat through military, intelligence and law enforcement as well as diplomatic efforts," Obama said after ministers of 10 nations met on the sidelines of a Nato summit in Wales to form what Washington called a "core coalition".

Ministers from Britain, France, Germany, Canada, Turkey, Italy, Poland, Denmark and non-Nato Australia attended the talks with the U.S. secretaries of state and defence, John Kerry and Chuck Hagel.

"Already allies have joined us in Iraq where we have stopped ISIL's advances, we have equipped our Iraqi partners and helped them go on offence," Obama told a news conference.

The United States hoped a new Iraqi government would be formed next week and was confident it would have a coalition for the sustained action required to destroy the militants.

French President Francois Hollande confirmed Paris was willing to join U.S. air strikes if requested by a new Baghdad government as part of a comprehensive international strategy to confront IS. He also raised the possibility of hot pursuit operations in Syria or assisting other rebels fighting IS there.

British Prime Minister David Cameron, who failed to win parliamentary backing for military action in Syria last year, was more cautious about participating in armed action, saying: "We are not at that stage yet."

The British public is deeply wary of foreign military intervention after London joined Washington in the 2003 invasion of Iraq based on false information about weapons of mass destruction. France, which opposed that operation, is more open to overseas action.

Obama drew criticism last week for saying he had not yet developed a strategy for confronting the Islamic State in Syria, which has provoked public outrage in the West with the gruesome beheading two U.S. journalists.

The United States stressed the need for a comprehensive approach in the talks on Friday and acknowledged that action against IS in Iraq would have implications in Syria as well.

"We are going to degrade and ultimately defeat ISIL, the same way that we have gone after al Qaeda," Obama said in some of his toughest comments since Washington began air strikes last month to halt the Islamists' advance in northern Iraq.

"You initially push them back, you systematically degrade their capabilities, you narrow their scope of action, you slowly shrink the space, the territory that they may control, you take out their leadership, and over time they are not able to conduct the same kinds of terrorist attacks as they once could."

In an attempt to counter the threat of U.S. and European militants returning from the region to attack the West, Nato announced plans for allies to share more information on westerners fighting for the militants.

A man with an English accent was filmed beheading the U.S. journalists and Britain raised its terrorism alert last week to its second-highest level over the threat posed by IS, meaning it assessed a strike was "highly likely".

STRATEGY TIME?

European officials said Cameron and Hollande, the leaders of Europe's main military powers, told Obama in private meetings that Washington had to do more than simply conduct air strikes on IS targets in Iraq and needed an overall strategy.

"It can't be just 'let's go and bomb a few targets and see what happens'," said one Western defence official familiar with the talks among allied leaders.

A British official, speaking on condition of anonymity, said: "There is a growing sense that this is going to take more than we are doing... but it needs to be a measured, cautious approach."

Though it was unclear how many nations would ultimately join Washington in supporting military operations in Iraq, Kerry and Hagel set out the limits of such action at a hastily arranged meeting in Newport - no land forces.

"Obviously I think that's a red line for everybody here: no boots on the ground," Kerry told the meeting. Obama said Kerry would visit the Middle East to help build a broad-based coalition to tackle the militants.

British and German ministers warned that it would be a long campaign to push the Sunni militants back after stunning gains they have made in Syria and Iraq, drawing volunteers from many countries including in the West.

Kerry said he hoped the allies could develop a comprehensive plan for combating IS in time for this month's annual U.N. General Assembly session in New York.

Turkey, which attended the talks, has been struggling to staunch a flow of foreign jihadists across its border with Syria. Hagel travels to Turkey next week.

A statement issued by Hagel and Kerry after the meeting said the coalition would need to go after IS finances, including any trade in petroleum products, and discredit its ideology. – Reuters