Iraq's gateway to Europe, the northern city of Arbil, is the first bottleneck on a long and uncertain journey for a growing number of Iraqis choosing exile.

"We're selling a lot of one-way tickets these days. More than ever. People are desperate," said Emre Shawkat, who runs a tourism transport business in Arbil, capital of Iraq's autonomous Kurdish region.

A car bomb blast near the U.S. consulate in Iraq's autonomous Kurdish region killed three people and wounded five on Friday, Kurdish officials said.

A spokeswoman in Washington said that all consulate staff had been accounted for and that "there are no reports of injuries to Chief of Mission personnel or local guards."

Billboards still read "Welcome to Arbil, 2014 Arab Tourism Capital," but most of the visitors Iraq's Kurdistan region welcomed last year were people made homeless by a jihadist offensive.

It was supposed to be tourism's takeoff year but the Islamic State (IS) group's June onslaught dashed those hopes overnight when it plunged Iraq into chaos.

The Islamic State jihadist group on Thursday claimed a rare suicide car bombing in the usually secure capital of Iraq's autonomous Kurdish region that killed four people. 

IS boasted in an online statement  that it had "breached all the security checkpoints of the agent Kurdistan government and reached the heart of the city of Arbil."

A suicide bomber detonated an explosives-rigged vehicle in the heart of the usually secure Iraqi Kurdish regional capital Arbil on Wednesday, killing four people, officials said.

The bomber hit the main checkpoint on the way to the provincial government headquarters in the northern city just before noon (0900 GMT), provincial council spokesman Hamza Hamed said.

The Iraqi government transferred $500 million to the autonomous Kurdish region on Wednesday as part of a deal aimed at ending long-running oil and budget disputes, the finance minister said.

The move eases tensions between the federal and regional governments, paving the way for a lasting settlement as well as possible increased cooperation against jihadists they are both fighting.

Iraq's Kurdish peshmerga, buoyed by U.S. air strikes, reclaimed two towns from jihadist fighters Sunday, while Western powers ramped up efforts to save displaced civilians stranded on a mountain.

The third straight day of strikes by U.S. jets and drones brought the first sign that U.S. President Barack Obama's decision to return to Iraq could turn the tide on two months of jihadist expansion.

Abu Dhabi's Etihad Airways announced Thursday a suspension of flights to Iraqi Kurdistan's capital of Arbil because of fighting in northern Iraq.

The decision was taken for the safety of passengers and crew, the airline, which has four Abu Dhabi-Arbil flights a week, said in a statement.

Hundreds of people demonstrated Thursday in Arbil, capital of Iraq's autonomous Kurdistan region, to condemn the forced displacement of Iraqi Christians and call for their protection.

Muslims, Christians, displaced people and political parties took part in the protest outside U.N. offices in Arbil, some 350 kilometers (220 miles) north of Baghdad.

Prime Minister Nuri al-Maliki on Wednesday accused Iraq's autonomous Kurdish region of harboring jihadists, further ratcheting up tensions despite calls for leaders to unite against a Sunni militant offensive.

And in scenes reminiscent of the brutal sectarian war of 2006-2007, when tens of thousands were killed, the authorities found the bodies of 53 men who had been bound and executed south of Baghdad.