US President Barack Obama on Wednesday condemned the Islamic State militants who beheaded an American journalist as "a cancer" and said "their ideology is bankrupt."

"The whole world is appalled by the brutal murder of James Foley," Obama said, speaking a day after the militants released a video of Foley being beheaded.

Obama said he called Foley's family to express his condolences.

Islamic State, which has been marching through northern Iraq, released the video as a warning to Washington but Obama said the United States will continue to do "what we must do to protect our people."

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