Obama, who discussed the crisis with his top national security advisers, has made U.S. action contingent on Iraqi Prime Minister Nuri al-Maliki's taking steps to broaden his Shi'ite-dominated government.
"The president will continue to consult with his national security team in the days to come," the White House said, without elaborating. A senior U.S. official said Obama had not yet decided on a course of action.
Militants from the Islamic State of Iraq and the Levant group have routed Baghdad's army and seized the north of the country in the past week, threatening to dismember Iraq and unleash all-out sectarian warfare with no regard for national borders.
The fighters have been joined by other armed Sunni groups that oppose what they say is oppression by Maliki. The U.N. human rights chief said forces allied with ISIL had almost certainly committed war crimes by executing hundreds of non-combatant men in Iraq over the past five days.
U.S. and Iranian officials discussed the crisis in Vienna on the sidelines of separate negotiations about the Iranian nuclear program, the two sides each said. Both ruled out military cooperation.
A U.S. official said the talks did not include military coordination and would not make "strategic determinations" over the heads of Iraqis.
"Iran is a great country that can play a key role in restoring stability in Iraq and the region," a senior Iranian official told Reuters. But he added: "Military cooperation was not discussed and is not an option."
Any joint action between the United States and Iran to help prop up their mutual ally in Baghdad would be unprecedented since Shi'ite Iran's 1979 revolution, a sign of the alarm raised by the lightning insurgent advance.
U.S. Secretary of State John Kerry called the advance an "existential threat" for Iraq. Asked if the United States could cooperate with Tehran against the insurgents, Kerry told Yahoo News: "I wouldn't rule out anything that would be constructive."
As for airstrikes: "They're not the whole answer, but they may well be one of the options that are important," he said. "When you have people murdering, assassinating in these mass massacres, you have to stop that. And you do what you need to do if you need to try to stop it from the air or otherwise."
Iran has long-standing ties to Maliki and other Shi'ite politicians who came to power in U.S.-backed elections.
In Baghdad, Brett McGurk, the State Department’s point man on Iraq, and U.S. Ambassador Stephen Beecroft, met with Maliki on Monday, U.S. officials said. The meeting is part of a U.S. effort to prod Maliki to govern in a less sectarian manner.
The officials, speaking on condition of anonymity, said Obama had not yet decided on political demands to be presented to Maliki.
Returning to Washington from a weekend trip to California, Obama convened a meeting of nearly 20 top advisers, including Kerry, Defense Secretary Chuck Hagel, CIA Director John Brennan and Chairman of the Joint Chiefs of Staff Martin Dempsey.
Hewing to a cautious approach to the Iraq crisis just 2-1/2 years after Obama withdrew U.S. troops from the country, the White House released scant information about the meeting. The senior official said the gathering yielded "no updated timeline" for Obama to render a decision on U.S. action.
ISIL seeks a caliphate ruled on medieval Sunni Muslim precepts in Iraq and Syria, fighting against both Iraq's Maliki and Syria's Bashar al-Assad, another ally of Iran. It considers Shi'ites heretics as deserving of death and has boasted of massacring hundreds of Iraqi troops who surrendered to it last week.
Its uprising has been joined by tribal groups and figures from Saddam's era who believe Maliki is hostile to Sunnis.
ISIL fighters and allied Sunni tribesmen overran another town on Monday, Saqlawiya, west of Baghdad, where they captured six Humvees and two tanks.
Witnesses said Iraqi army helicopters were hovering over the town to provide cover for retreating troops.
A security officer said he saw a helicopter that was shot down by an anti-aircraft machine gun. There was no official comment from the government.
Overnight, the fighters captured the city of Tal Afar in northwestern Iraq, solidifying their grip on the north.
"Severe fighting took place, and many people were killed. Shi'ite families have fled to the west and Sunni families have fled to the east," said a city official.
Tal Afar is near Mosul, the north's main city, which ISIL seized last week. Fighters then swept through towns on the Tigris before halting about an hour's drive north of Baghdad.
Iraq's army is holding out in Samarra, a city on the Tigris river that is home to a Shi'ite shrine. A convoy sent to reinforce troops there was ambushed on Sunday by Sunni fighters near Ishaqi. Fighting continued through Monday morning.
An Iraqi army spokesman reported fighting also to the south of Baghdad. He said 56 of the enemy had been killed over the previous 24 hours in various engagements.
OBAMA WEIGHING OPTIONS
Obama pulled out all U.S. troops in late 2011 and rules out sending them back, although he is weighing other options such as airstrikes. A U.S. aircraft carrier has sailed into the Gulf along with a warship carrying 550 marines.
The only U.S. military contingent is the security staff at the U.S. Embassy. Washington is evacuating some diplomatic staff and is sending up to 275 support and military personnel to help safeguard the facilities.
The United Nations said it had relocated 58 staff to Jordan.
Potential cooperation between the United States and Iran shows how dramatically the ISIL advance has redrawn the map of Middle East alliances in a matter of days.
Iranian President Hassan Rouhani, a relative moderate elected last year, has presided over a gradual thaw with the West, including secret talks with Washington that led to a preliminary deal to curb Iran's nuclear program. But open cooperation against a mutual threat would be unprecedented.
Any rapprochement between Washington and Tehran over Iraq could anger U.S. allies Israel and the Sunni Gulf Arab states. Saudi Arabia, the Gulf's main Sunni power, said it rejected foreign interference in Iraq, and blamed Baghdad's "sectarian and exclusionary policies" for fuelling the insurgency.
ISIL fighters' sweep through the Tigris valley north of Baghdad included Saddam's hometown, Tikrit, where they captured and apparently massacred troops at Speicher air base, once one of the main U.S. headquarters.
Pictures distributed on a purported ISIL Twitter account appeared to show gunmen from the Islamist group shooting dozens of men, unarmed and lying prone. Captions said they were army deserters captured as they tried to flee fighting.
ISIL said it executed 1,700 soldiers out of 2,500 it had captured in Tikrit. Although those numbers appeared exaggerated, the total could still be in the hundreds. A former local official in Tikrit told Reuters ISIL had captured 450 to 500 troops at Speicher and 100 others elsewhere in Tikrit. Some 200 troops were still believed to be holding out in Speicher.
U.N. rights chief Navi Pillay said corroborated reports showed that soldiers, military conscripts, police and others who had surrendered or been captured had been summarily executed.
"Although the numbers cannot be verified yet, this apparently systematic series of cold-blooded executions, mostly conducted in various locations in the Tikrit area, almost certainly amounts to war crimes," she said.
Despite Washington's calls for Maliki to reach out to Sunnis to create unity, the prime minister has spoken more of retaliation than reconciliation.
"We will work on purging Iraq of the traitors, politicians and those military men who were carrying out their orders," he said on Monday.
Shi'ites, who form the majority in Iraq and are mainly in the south, have rallied to defend the country after a mobilization call by the top Shi'ite cleric, Ali al-Sistani.
A leading Sunni cleric, Rifa al-Rifaie, said Sistani's call amounted to sectarianism. Sistani is known as a moderate who never called his followers to arms during the U.S. occupation.
"Sistani, that lion, where was he when the Americans occupied Iraq?" Rifaie said, listing Sunni grievances: "We have been treated unjustly, we have been attacked, our blood had been shed and our women have been raped."
Tareq al-Hashemi, a Sunni who was vice president until fleeing the country in 2012 after Maliki accused him of terrorism, said the violence was part of a broader Sunni revolt that could lead to a holy war, and was not just an ISIL rampage.
"What happened in my country ... is desperate people revolted. Simple as that. Arab Sunni communities over 11 years faced discrimination, injustice, corruption," he told Reuters.
(Additional reporting by Isabel Coles and David Sheppard in Arbil, Raheem Salman, Ahmed Rasheed, Oliver Holmes and Ned Parker in Baghdad, Alexander Dziadosz and Samia Nakhoul in Beirut, Missy Ryan, Mark Felsenthal, Matt Spetalnick and Jim Loney in Washington, Tom Miles in Geneva, and Nick Tattersall in Istanbul; Writing by Peter Graff; Editing by Alastair Macdonald, Giles Elgood, Steve Orlofsky, Peter Cooney and Clarence Fernandez)