Isis fighters 'realise cause is lost' as numbers fall to two-year low, Barack Obama says

Pentagon officials have said US air strikes alone killed 25,000 militants

A member of Iraqi government forces inspects a burnt Isis vehicle, after they retook an area from its jihadists in the village of Al-Mamoura, near Hit, a Euphrates Valley town located about 145 kilometres west of Baghdad in the western province of Anbar

The size of Isis's army is at its lowest level for two years, the group has lost swathes of territory and the group’s fighters “realise their cause is lost”, Barack Obama has said.

Setting out the current state of the war against the so-called Islamic State, the US President said the jihadist group had lost 40 per cent of its territories in Iraq and 10 per cent of those in Syria as well as numerous financial setbacks.

The Pentagon has also claimed air strikes have killed more than 25,000 Isis militants.

President Barack Obama speaks at the CIA Headquarters in Langley, Va (AP)

“In other words, the Isis core in Syria and Iraq continues to shrink,” he said. “Their ranks of fighters are estimated to be at the lowest levels in about two years, and more and more of them are realizing that their cause is lost.”

"Our cyber operations are disrupting their command-and-control and communications.

"We continue to target ISIL’s financial infrastructure, including its oil wells, refineries and supply lines. We’ve reduced their oil production and their oil revenue.

"And every dollar we deny them means one less dollar to pay their fighters and to fund their terror."

But the President also sounded a note of caution, warning Isis has gained ground and increased its fighting force in Libya.

On Sunday, Mr Obama revealed he thought his “worst mistake” in office was the failure to plan for the aftermath of Colonel Muammar Gaddafi’s downfall.

Previously, US officials have pointed to intelligence suggesting Isis numbers in Libya have doubled in the past year up to around 5,000 fighters.

“As we, our allies and partners have made it harder for foreign terrorists to reach Syria and Iraq, we’ve seen an uptick in the number of Isis fighters heading to Libya,” Mr Obama said.

And even as he praised recent military successes against Isis in its territories, the Mr Obama sounded a sobering note.

“As I’ve said repeatedly, the only way to truly destroy Isis is to end the Syrian civil war that Isis has exploited,” he said.

"The cessation of hostilities in the Syrian civil war has largely held for about six weeks. It has reduced the violence, although not eliminated it, but that reduction is meaningful and it's allowed some humanitarian aid to reach the Syrian people.

"So the cessation has saved lives. But as we’re seeing around Aleppo and other areas, the cessation is tenuous and under strain. "