Iraq's prime minister has warned insurgents in the stronghold city of Fallujah that "the window is closing for a peaceful settlement," raising expectations that a full-scale military assault on the city is imminent.

Speaking to reporters in Brussels, where he is attending a European Union summit, Iyad Allawi said most Fallujans had fled and only foreign terrorists and insurgents remained.

U.S. troops and Iraqi security forces are poised around both Fallujah and Ramadi waiting for Mr. Allawi's order to crush the insurgents. The prime minister has said he will use force if necessary to restore security ahead of national elections, which are slated to take place on January 27.

Overnight, U.S. troops blocked all the roads leading in and out of Fallujah and stepped up bombings of insurgent targets. Women and children were also warned to leave the city.

Some information for this report provided by AFP and Reuters.