Al Qaeda is seizing on the turmoil in Pakistan to create chaos and strengthen its presence in the country while bolstering other Islamic militant groups there, U.S. and Pakistani officials have reportedly said.

One indication of this effort came April 19, when a truck parked inside an Al Qaeda compound in South Waziristan erupted in a fireball when it was struck by a CIA missile, The New York Times reported on Monday.

American intelligence officials say the truck had been loaded with high explosives, apparently to be used as a bomb in an attack that would have been more devastating than the homicide blast that killed more than 50 people at the Marriott Hotel in Islamabad in September, the paper said.

Intelligence officials say Taliban advances in Swat Valley and Buner, which are closer to Islamabad than to the tribal areas, have already helped Al Qaeda in its recruiting efforts, The Times reported.

The terror group's recruiting campaign is being aimed at young fighters across the Middle East, North Africa and Central Asia who are more likely to focus their energies on local targets, the report said.

"They smell blood, and they are intoxicated by the idea of a jihadist takeover in Pakistan," Bruce Riedel, a former CIA analyst told the paper.

A senior U.S. intelligence official expressed concern that recent successes by the Taliban in extending territorial gains could foreshadow the creation of "mini-Afghanistans" around Pakistan that would allow militants more freedom to plot attacks, The Times said.

It is unlikely, however, that Islamic militants will seize power in Pakistan, intelligence analysts told the paper.

Meanwhile, a major Pakistani military offensive in the northwest left up to 700 militants dead in the past four days, and the operation will proceed until the last Taliban fighter in the area is ousted, the country's top civilian security official said Monday.

The offensive in Swat and surrounding districts has earned praise from the U.S., which wants Al Qaeda and Taliban militants rooted out from Pakistani havens where they can plan attacks on American and NATO forces in Afghanistan. But the fighting has unleashed an exodus of refugees, and raised concern over the future of nuclear-armed Pakistan.

Interior Minister Rehman Malik's announcement of 700 militants killed came as a witness and a police official reported new airstrikes in parts of the Swat Valley, a one-time tourist haven that fell prey to Taliban advances two years ago.

Malik's toll — which exceeds that given by the military on Sunday by at least 200 — could not be independently confirmed.

"The operation will continue until the last Talib," Malik said. "We haven't given them a chance. They are on the run. They were not expecting such an offensive."

On Sunday, a suspension of a curfew allowed tens of thousands more civilians to leave Swat for safer parts of the northwest.

The U.N. said Monday that 360,600 displaced people had registered in camps and centers since May 2 after fleeing Swat and neighboring Dir and Buner districts. That's on top of some 500,000 people registered as displaced due to past offensives — a major humanitarian test for the weak government.

The military has relied heavily on airstrikes since the offensive in Swat began full-scale on Thursday, and it was unclear how authorities identified the militant dead. Authorities have yet to say how many civilians have been killed or wounded, possibly for fear of causing a public outcry.

The army's top spokesman said Sunday that so far some 400 to 500 militants had died. But Malik said the figure was closer to 700, and that it was expected to "rapidly rise."

Jawad Khan, a university student who lives in the Kabal area of Swat, said jets bombed the nearby Dhada Hara village Monday morning.

"I saw smoke and dust rising from the village," Khan said, adding he didn't know about casualties because of curfew restrictions, which have been enforced again.

A police official said jets bombed the Matta area of Swat on Monday as well.

The official said he was confined to his station but could see a decapitated body lying outside along a road where a clash between military forces and the Taliban on Sunday left six militants dead. He requested anonymity because of security reasons.

He also said that information he had received indicated the militants retained control of Swat's main town, Mingora.

The military responded with force to the Taliban last month after the insurgents in Swat tried to impose their reign in other neighboring areas, including a stretch just 60 miles from the capital, Islamabad.

Swat lies near the Afghan border as well as the wild Pakistani tribal areas, where Al Qaeda and the Taliban have strongholds and where U.S. officials believe Al Qaida chief Usama bin Laden may be hiding. The army says 12,000 to 15,000 troops in Swat face 4,000 to 5,000 militants, including small numbers of foreigners and hardened fighters from the South Waziristan tribal region.

Many in the northwest have little faith in the government's ability to help them, a challenge to Pakistan's leaders because disillusioned refugees could prove fertile recruiting ground for the Taliban.

Malik said the government was providing sufficient funds to help the displaced Pakistanis, and brushed aside fears that militants would try to infiltrate relief camps.

"This fear is baseless that they are melting down among the displaced people because we are screening the displaced people," he said. "We are registering them with documents, checking each and every individual."

The Associated Press contributed to this report.