IS had declared its ambition to develop weapons of mass destruction in the most recent edition of its propaganda magazine Dabiq, stating that there is an "infinitely" greater chance of the cash-rich group smuggling its first nuclear weapon from Pakistan to attack the US within a year.

Ms Bishop told 'The Australian' that NATO was deeply concerned about the theft of radioactive material.

"The insurgents did not just clear out the cash from local banks," she was quoted as saying.

In a speech in Perth last week, Ms Bishop warned that the Islamic State may be developing poison-gas weapons.

She later told the daily that her speech was based on reports from the Defence Department and the Department of Foreign Affairs and Trade.

By capturing territory, Islamic State, which is also known as Da'ish, had gained access to materials normally held by governments.

"That's why stopping Da'ish gaining territory is so important," she said.

The Islamic State terror group is believed to have collected radioactive material from hospitals and research establishments in cities it has captured in Iraq and Syria, raising fears it could build a large "dirty" bomb, Ms Bishop
said.

Her comments came as terrorism specialists warned that Islamic State could carry out major attacks in Iraq and Syria during Ramadan, which begins on June 17, and that competition among terror groups could see al-Qaeda carry out a massive attack to restore its standing.

Possible targets of Islamic State attacks might include Baghdad International Airport or the Taji air base where Australian Army instructors train Iraqi forces, they said.

Bishop said the so-called Australia Group - a bloc of about 40 nations, plus the European Community, established 30 years ago to stop the spread and development of chemical, biological and radiological weapons -- was concerned enough about the threat to dedicate a session to it at a forum in Perth last week. "This is really worrying them," Ms Bishop said.