ANKARA, 7 June 2007 — Turkey denied a report yesterday it had launched a major incursion into northern Iraq to crush Kurdish rebels there, but a military source said troops had conducted a limited raid across the mountainous border.

Rumors of an invasion have rattled financial markets amid growing Turkish anger over the activity of Turkish Kurdish rebels using the mountains of northern Iraq as a refuge. Washington has urged caution on Ankara, fearing conflict in what has been one of the most stable areas of Iraq.

“This cannot be called a cross-border operation, it is a limited operation,” said the Turkish military source. He did not say how many troops were involved in the raid.

The source said it was not unusual for troops to make “hot pursuit” raids into Iraq, where an estimated 4,000 rebels of the outlawed Kurdistan Workers Party (PKK) are said to be hiding.

US military spokesman Col. Steve Boylan said in Baghdad: “We have seen no indication of Turkish troops crossing the border.”

Earlier, the DEBKAfile website said 50,000 men had been dispatched as the “first wave” of an invading force. Ankara described the report as “disinformation.”

Government officials in the northern Iraqi autonomous region of Kurdistan agreed.

“Up to this moment, there is no incursion by Turkish troops into the Iraq Kurdistan region,” Fouad Hussein, the head of the office of Kurdistan President Massoud Barzani, told Reuters. In Baghdad, Iraq’s Foreign Minister Hoshyar Zebari said there was no evidence of a military incursion.

PKK military commander Bahouz Ardal said the reports had been planted to test public reaction to any such a move.