And as shockwaves from the crisis reverberated around the world, oil companies began closing fields and evacuating staff from Kurdistan in a move that has caused shares to plummet.
Meanwhile, Pope Francis begged world leaders to help end the crisis, after Iraq's largest Christian town was sacked sending tens of thousands of Iraqi Christians fleeing for their lives.
Yesterday ISIS captured Qaraqush and several others near Mosul following the withdrawal of Kurdish peshmerga fighters.
'(The Christians) have fled with nothing but their clothes, some of them on foot, to reach the Kurdistan region,' Patriarch Sako told AFP. 'This is a humanitarian disaster; the churches are occupied, their crosses were taken down.' He added that up to 1,500 manuscripts were burnt.
The Vatican said in a statement: 'His Holiness addresses an urgent appeal to the international community to take action to end the humanitarian tragedy now underway, to act to protect those affected or threatened by violence and to provide aid, especially for the most urgent needs of the many who have been forced to flee and who depend on the solidarity of others.'
While Iraq's Christian population has declined steeply since the end of the Iraq War, there are still some 450,000 - 1.2 per cent of the country - living there.
The rush of people expelled from their homes or fleeing violence has exacerbated Iraq's already-dire humanitarian crisis, with some 200,000 Iraqis joining the 1.5 million people already displaced from violence this year.
Yesterday, the al-Qaida breakaway Islamic State posted a statement online confirming it had captured the Mosul Dam and vowing to continue 'the march in all directions,' as it expands its self-styled caliphate.
The group said it has seized a total of 17 Iraqi cities, towns and targets - including Qaraqush and Sinjar. Their statement could not be independently verified, but it was posted on a website frequently used by militants.
Obama's announcements reflected the deepest American engagement in Iraq since US troops withdrew in late 2011 after nearly a decade of war.
Mr Obama, who made today's remarks in a steady and sombre tone, has staked much of his legacy as president on ending what he has called the 'dumb war' in Iraq.
The president said the humanitarian airdrops were made at the request of the Iraqi government.
'We thank Barack Obama,' said Khalid Jamal Alber, from the religious affairs ministry in the semi-autonomous Kurdish government in northern Iraq.
In Baghdad, the Ministry of the Displaced also welcomed the aid drops. The ministry's spokesman, Satar Nawrouz, said the drops came 'just in time.'
Mindful of the public's aversion to another lengthy war, Mr Obama acknowledged that the prospect of a new round of US military action would be a cause for concern among many Americans.
He vowed anew not to put American combat troops back on the ground in Iraq and said there was no US military solution to the crisis.
'As commander in chief, I will not allow the United States to be dragged into fighting another war in Iraq,' Mr Obama said.
Even so, he outlined a rationale for airstrikes if the Islamic State militants advance on American troops in the northern city of Erbil and the US consulate there in the Kurdish region of Iraq.
The troops were sent to Iraq earlier this year as part of the White House response to the extremist group's swift movement across the border with Syria and into Iraq.
'When the lives of American citizens are at risk, we will take action,' Mr Obama said. 'That's my responsibility as commander in chief.'
He said he had also authorised the use of targeted military strikes if necessary to help the Iraqi security forces protect civilians.
The president spoke following a day of urgent discussions with his national security team.
He addressed the nation only after the American military aircraft delivering food and water to the Iraqis had safely left the drop site in northern Iraq.
The Pentagon said the airdrops were performed by one C-17 and two C-130 cargo aircraft that together delivered a total of 72 bundles of food and water.
They were escorted by two F/A-18 fighters from an undisclosed air base in the region.
The planes delivered 5,300 gallons of fresh drinking water and 8,000 pre-packaged meals and were over the drop area for less than 15 minutes at a low altitude.
The president cast the mission to assist the Yazidis as part of the American mandate to assist around the world when the US has the unique capabilities to help avert a massacre.
In those cases, Mr Obama said, 'we can act carefully and responsibly to prevent a potential act of genocide'.
Officials said the US was prepared to undertake additional humanitarian airdrops if necessary, though they did not say how quickly those missions could occur.
And today, David Cameron welcomed US President Obama's decision to authorise airstrikes, saying the world must help religious minorities in Iraq who are under threat from the militants 'in their hour of desperate need' - but ruled out any British military intervention.
Instead, he said he had asked officials to look into what assistance the UK can provide.
In a statement on Friday morning, Mr Cameron said: 'I am extremely concerned by the appalling situation in Iraq and the desperate situation facing hundreds of thousands of Iraqis. And I utterly condemn the barbaric attacks being waged by Isil terrorists across the region.
'I am especially concerned for the minority Yazidi community now trapped on Mount Sinjar, where they have fled for their lives.