Volunteers, who have joined the Iraqi Army to fight against predominantly Sunni militants from the radical Islamic State of Iraq and the Levant (ISIL), carry weapons during a parade in the streets in Al-Fdhiliya district, eastern Baghdad June 15, 2014. The insurgent offensive that has threatened to dismember Iraq spread to the northwest of the country on Sunday, when Sunni militants launched a dawn raid on a town close to the Syrian border, clashing with police and government forces.
Prime Minister Tony Abbott told parliament on Monday that the situation in Iraq may escalate to an extent where a terrorist state is born out of it - threatening not just Iraq and the Middle East but the whole world.
"Should the control of this group be consolidated, we are faced with the situation of a terrorist state, a terrorist state with considerable sway over a quite sophisticated, or parts of a quite sophisticated country. It is a security disaster for the Middle East and for the wider world. No-one should underestimate the difficulty that this development poses to the people of Iraq and to the people of the Middle East and ultimately to the people of the whole world," Mr Abbott told parliament.
"It seems that this group has proceeded through Iraq with maximum violence and terror to the civilian population and has behaved with extraordinary brutality towards surrendering Iraqi soldiers and policemen," he said.
Mr Abbott met the parliament as he returned from his two-week overseas trip.
Both Australia and US feel the looming terror that Iraqi militants are bringing.
According to reports, more than 200 Australians are fighting with Syrian rebels. ASIO, in fact, had seized passports from young Australians suspected of traveling to Syria to join rebel groups.
These Australians are now believed to be members of the ISIS and believed to have crossed the border and are marching toward Baghdad, US officials told The Saturday Telegraph.
United States president Barack Obama had spoken about a growing concern that both young Americans and Australians were being recruited by rebel groups and were returning to respective countries to spread terror and violence.
"We discussed the situation in the Middle East and the concerns we have around Iraq and Syria," Mr Obama remarked after a meeting with Mr Abbott at the White House.
"Both our countries are potentially threatened by jihadists and freedom fighters, as they call them, that are going into Syria, getting trained in terrorist tactics and then potentially coming back to our countries and could end up being a significant threat to our homeland," Mr Obama said.