Insurgents are said to have taken over three-quarters of Iraq's biggest oil refinery after launching a mortar and machine-gun assault.
Smoke was seen billowing from the Baiji complex as officials confirmed it had been infiltrated by Islamic State of Iraq and Syria (ISIS) militants - potentially giving them control of the energy supply in northern Iraq.
Production had already ceased at the refinery, north of Baghdad, after clashes nearby.
A car bomb in a mainly Shi'ite district of Baghdad killed at least seven The attack comes as it emerged that ISIS charts its brutality and tactics in annual reports called al-Naba - The Report.
The 2013 version cites 10,000 operations in Iraq, including 1,000 assassinations and 4,000 improvised explosive devices planted.
The US-based Institute for the Study of War has analysed the 2012 and 2013 reports and corroborates much of the information they contain.
Claims made by ISIS in its 2013 annual report Other claims in the 2013 report include the freeing of hundreds of radical prisoners - and hundreds of "apostates" being turned.
Meanwhile, as ISIS continues its move towards Baghdad, Iranian President Hassan Rouhani has warned that "the great Iranian people will do everything to protect" revered Shi'ite shrines in Iraq from the Sunni militants - the clearest indication yet that Tehran is preapred to mobilise.
This comes as Kurdish forces in the northern Iraqi towns of Saadiya and Jalula began a counter offensive against ISIS.
Sky News' Diplomatic Editor Tim Marshall will answer questions about Iraq Mosul, the country's second biggest city, is one of a number in the north to have fallen.
Some 44 prisoners were killed when insurgents attempted to storm a jail in Baquba - less than 40 miles from Baghdad.
The bodies of 18 Iraqi security personnel were also discovered outside the city of Samarra, which is home to one of the most important Shi'ite shrines.
Volunteers to fight the insurgency take a training session in Kerbala Elsewhere, Turkey's embassy in Baghdad is looking into reports that ISIS has abducted 60 foreign construction workers, including 15 Turks, near the city of Kirkuk.
Amid the troubles photographs have emerged of heavily armed children alongside both the Jihadists and fighters loyal to the government.
In Baghdad, residents are stocking up on food and water in preparation for an ISIS assault on the capital.
An Iraqi boy joins a Shi'ite tribe preparing to fight the militants As the West ponders its response to the crisis, David Cameron will today chair a meeting of the National Security Council after declaring that ISIS terrorists pose a "real threat" to Britain.
The US has urged Iraq's Shi'ite Prime Minister, Nouri al-Maliki, to reach out to Sunnis in an attempt to calm hostilities.
:: Sky News' Diplomatic Editor Tim Marshall will answer questions about Iraq on Twitter @skytwitius between 12.30 and 1.30pm UK time.
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