Baghdad: Iraqi forces and Kurdish Peshmerga fighters reached an agreement on Friday to stop fighting in northern Iraq, the media office of the US-led anti-Daesh coalition said.

A spokesman for the coalition in Baghdad told Reuters the ceasefire agreement covered all fronts.

Iraqi government forces and the Iranian-backed Popular Mobilisation launched a surprise offensive on Oct. 16 in retaliation to a Sept. 25 referendum on independence organised by the Kurdistan Regional Government (KRG) in northern Iraq.

The offensive aims to capture disputed territories, claimed by both the KRG and the Iraqi central government, as well as border crossings and key oil facilities.

The oil-rich city of Kirkuk fell to Iraqi forces without much resistance on Oct. 16 but the Peshmerga began to fight back forcefully as they withdrew closer to the core KRG territory.

The most violent clashes happened in the northwestern corner where Peshmerga are defending land crossings to Turkey and Syria and an oil hub that controls KRG crude exports.

Baghdad is currently engaged on two separate fronts: pushing a final offensive to eradicate Daesh along the western border with Syria, while looking to snatch back disputed territory from the Kurds in the north.

Iraqi forces on Thursday mounted a new assault on Kurdish fighters in the strategic Zummar area of Nineveh province, triggering heavy artillery exchanges in the latest flare-up of a crisis sparked by an independence vote last month.

After claiming the capture of several villages, Baghdad laid down a tight deadline to the Kurds to withdraw from the area around the Fishkhabur border post “within several hours”, a government source told AFP.

But the Kurds insisted they had managed to repulse all Iraqi advances and gave no indication they were willing to abandon the crucial oil export route, where rival pipelines belonging to both sides cross into Turkey.

There had been fears the bitter dispute that has deepened between the Baghdad government and Iraqi Kurdish leaders since they held a referendum for independence would hamper the battle against Daesh

But buoyed by a string of recent military successes, Iraq’s Prime Minister Haider Al Abadi is pressing ahead with the dual offensives.

As the latest push began against the Kurds, Al Abadi also announced the start of an offensive to retake the “last den” of Daesh miltants in the country around the town of Al Qaim in the Euphrates valley on the border with Syria.

An Iraqi general told AFP that troops bombarded Daesh with missiles and mortars south of the town on Friday as they tried to press early gains.

Iraqi forces backed by air strikes from a US-led coalition have recaptured 95 per cent of the territory Daesh seized in the country in 2014, dismantling their so-called caliphate.