DEIR EZZOR, Syria - Syrian and allied forces converged Saturday on holdout Islamic State group fighters in the Syrian border town of Albu Kamal, the militants' very last urban bastion following a string of losses.

On Friday Russian-backed Syrian regime forces took full control of Deir Ezzor, which was the last city where IS still had a presence after being expelled from Hawija and Raqa last month.

The borders of a "caliphate" that three years ago spanned territory in Iraq and Syria roughly the size of Britain further shrank on the group's surviving fighters when Iraqi forces retook Al-Qaim Friday.

The town lies along the Euphrates river in western Iraq and faces Albu Kamal, which is where many of IS's remaining fighters are thought to have regrouped in their debacle. The Syrian army and allied militia groups were still some 30 kilometres (nearly 20 miles) from Albu Kamal but Iraqi paramilitaries crossed the border to take on IS, the Syrian Observatory for Human Rights said. "Fighting pitted Hashed al-Shaabi units against the Islamic State in the Hiri area," said Rami Abdel Rahman, who heads the Britain-based monitor.

Hiri lies just across the border from Al-Qaim, on the outskirts of Albu Kamal, now the last town of note still fully controlled by Abu Bakr al-Baghdadi's militant group. Abdel Rahman said IS was able to pin back the Iraqi forces. The Hashed al-Shaabi (Popular Mobilisation) are a paramilitary umbrella dominated by Shiite militia outfits loyal to Tehran.

The Syrian regime forces, backed by intensive Russian air strikes, are advancing on Albu Kamal from an oil pumping station in the desert west of the town.

Kurdish-led US-backed fighters from the Syrian Democratic Forces were making fresh gains further north in Syria's eastern Deir Ezzor province, the Observatory said. The Euphrates Valley border area was the heart of the "caliphate" IS proclaimed in 2014 and is now its last redoubt, where a US-led coalition supporting the military effort said around 1,500 militant fighters remained.

The parallel offensives have sent thousands of civilians running for their lives, some of them straight into the desert.

Sonia Khush, Syria director at the Save the Children charity, said an estimated 350,000 people have fled the recent fighting in Deir Ezzor province, half of them children. "The situation in the city, and surrounding countryside, has been especially bleak with civilians trapped between the fighting and all too often caught in the crossfire," she said.

Iraqi forces made light work of Al-Qaim and while Albu Kamal is now the last urban bastion the militants have, it is unclear how much resistance they can or intend to put up. The US-led coalition said anti-IS forces would hunt down militants to the last one.

"The coalition must and will deny IS safe haven in Iraq and Syria," spokesman Ryan Dillon told AFP.

As their dream of a militant state continues to disintegrate, surviving militants are expected to hide in the desert area straddling the border and go dark for some time. The group has retained its capacity to carry out suicide bombings in cities such as Damascus and Baghdad, as well as to inspire high-profile attacks in the West such as this week's Manhattan truck attack.

Despite its defeats on the battlefield, analysts are warning that IS is not down and out in the absence of a political vision to ensure stability in Iraq and Syria.

"This absence of a long-term strategy leaves Daesh (IS) a lot of room for regrouping in the near future, while continuing to work its networks of supporters around the world," said Jean-Pierre Filiu, a professor at Sciences Po university in Paris.