(AP) -- Sunni militants captured a strategic northern Iraqi city along the highway to Syria on Monday, sending thousands of residents from an ethnic minority fleeing for safety and moving closer to their goal of linking areas under their control on both sides of the border.

U.S. Secretary of State John Kerry said Monday that American drone strikes are an option in a bid to halt the dramatic sweep by insurgents over a swath of Iraq. He also said the Obama administration is willing to talk with Iran and does not rule out potential military cooperation between the two rivals to stop the rampage.

Already, the commander of Iran's elite Quds Force, Gen. Ghasem Soleimani, is in Iraq, consulting with officials on how to roll back the al-Qaida-breakaway group leading the insurgent charge, known as the Islamic State of Iraq and the Levant, Iraqi security officials said.

Soleimani has been inspecting Iraqi defenses and reviewing plans with top commanders and Iranian-backed Iraqi Shiite militias, the officials said, speaking on condition of anonymity because they were not authorized to discuss the visit. He set up an operations room to coordinate militias.

Soleimani is one of the most powerful figures in Iran's security establishment. His Quds Force is a secretive branch of Iran's Revolutionary Guard involved in external operations. In the mid-2000s', it organized Shiite militias in a campaign of deadly violence against U.S. troops in Iraq, according to American officials. More recently, it has been involved in helping Syria's President Bashar Assad in his fight against Sunni rebels.

The militants' capture of Tal Afar on Monday was a key prize, as it sits on a main highway between the Syrian border and Mosul, Iraq's second largest city, which the Islamic State captured last week.

At the same time, further south, Islamic State fighters were battling Monday with government troops at Romanah, a village near another of Iraq's main border crossings into Syria in Sunni-majority Anbar province, according to a security official in Baghdad who spoke on condition of anonymity because he was not authorized to speak to the media.

The Islamic State already controls territory in Syria in several regions abutting the Iraqi border. Its fighters move relatively freely along with money, weapons equipment across the porous, unprotected desert border. But seizing an actual border crossing would be a major symbolic gain for the group as it tries to carve out an enclave bridging the two countries.

Tal Afar, a city of 200,000 located 420 kilometers (260 miles) northwest of Baghdad, is dominated by ethnic Turkomen, who are both Sunni and Shiite. That raises fears of new atrocities by Islamic State fighters, who brand Shiites as heretics.

Over the weekend, the group posted graphic photos purporting to show its fighters executing scores of Iraqi soldiers captured when it overran other areas the past week.

Tal Afar Mayor Abdulal Abdoul told The Associated Press that the city was taken just before dawn. One resident, Hadeer al-Abadi, said militants in pickup trucks mounted with machine guns and flying black jihadi banners were roaming the streets as gunfire rang out.

Fighting in the city began Sunday, with Iraqi government officials saying that Sunni fighters were firing rockets seized from arms depots around Mosul. They said the local garrison suffered heavy casualties and the main hospital was unable to cope with the wounded, without providing exact numbers.

The local security force fled before dawn, and local tribesman who continued to fight later surrendered to the militants, said al-Abadi as he prepared to head out of town with his family.

Another resident, Haidar al-Taie, said a warplane was dropping barrels packed with explosives on militant positions inside the city on Monday morning and many Shiite families had left the town shortly after fighting broke out on Sunday.

"Residents are gripped by fear and most of them have already left the town for areas held by Kurdish security forces," al-Abadi said. The city lies just south of the self-rule Kurdish region and many residents were fleeing to the relatively safe territory, joining an influx of refugees from Mosul and other areas that have been captured by the militants.

Some 3,000 others from Tal Afar fled west to the neighboring town of Sinjar.

Throughout the past decade since the 2003 U.S.-led invasion of Iraq, Tal Afar was often hit by car bombings and other attacks by Sunni militants, targeting its Turkomen minority. At one point, after a major American offensive to drive out insurgents, then-President George W. Bush in 2006 declared Tal Afar a success story that shows "the outlines of the Iraq that we and the Iraqi people have been fighting for ... A free and secure people are getting back on their feet."

Since last Monday, Islamic State fighters and their insurgent allies have swept down from Mosul capturing a swath of territory at least 120 miles (200 kilometers) long toward Baghdad, and they vow to assault the capital itself. The stunning turn of events in Iraq, 2 ½ years after the U.S. military withdrew from the country is threatening long-established borders and raising alarm in Washington, Turkey and other neighboring countries.

Perhaps no greater sign of the alarm is the fact that the United States would consider working with Iran against the insurgents -- despite years of efforts to limit influence by the neighboring Shiite-dominated powerhouse in Iraq.

Iran now could take a similar role in Iraq that it plays in Syria, where its support -- along with that of Iraqi and Lebanese Shiite fighters on the ground -- has been crucial to Assad's survival.

Kerry said Monday in an interview with Yahoo! News that Washington is "open to discussions" with Tehran if the Iranians can help end the violence and restore confidence in the Iraqi government.

Kerry also said that U.S. drone strikes "may well" be an option.

U.S. officials said earlier there is a possibility that a senior American diplomat may discuss Iraq with an Iranian delegation at nuclear talks in Vienna.

Iranian-backed Iraqi Shiite militias, along with thousands of other volunteers, joined Iraq's security forces to prepare for what Prime Minister Nouri al-Maliki -- a Shiite close to Iran -- has vowed to be a fight to liberate every inch of Iraqi territory from the insurgents.

Militants on Monday ambushed a vehicle carrying off-duty soldiers to Samarra, a city north of Baghdad that is a key battleground with the militants. Six soliders were killed and four wounded in the attack, a government official said.

Security has been tightened around Baghdad, particularly on its northern and western edges, and food prices have dramatically gone up because of the transportation disruptions on the main road heading north from the capital.

Thousands of Shiites are already heeding a call from their most revered spiritual leader, the Iranian-born Grand Ayatollah Ali al-Sistani, to take up arms against the Sunni militants.

"We will march and liberate every inch they defaced, from the country's northernmost point to the southernmost point," al-Maliki told volunteers on Sunday. The volunteers responded with Shiite chants.

On Monday, Interior Ministry spokesman, Brig. Gen. Saad Maan Ibrahim, told a press conference that Iraqi security forces killed 56 "terrorists" and wounded 21 in operations just outside the capital over the last 24 hours. He made no mention of Tal Afar and left without taking any questions.

Security at the U.S. Embassy in Baghdad also was strengthened and some staff members were sent elsewhere in Iraq and to neighboring Jordan, the State Department said Sunday.

The State Department also issued a travel warning for Iraq on Sunday night, which cautioned U.S. citizens to avoid "all but essential travel to Iraq." The warning said the Baghdad International Airport was "struck by mortar rounds and rockets" and the international airport in Mosul also has been targeted.

However, a senior Baghdad airport official, Saad al-Khafagi, denied that the facility or surrounding areas have been hit. State-run Iraqiya television also denied the attack, quoting the Ministry of Transport.

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Associated Press writers Matthew Lee in Washington and George Jahn in Vienna contributed to this report.