"Iraq will not tolerate any military incursion. There is always room for dialogue."

A White House spokesman, in Germany for a G8 summit, also said that "no new activity" had been detected in northern Iraq.

'Limited operation'

A Turkish military official told Reuters news agency that troops had conducted "a limited operation" into Iraq in recent days.

"We have checked all along the border and there hasn't been any incursion or military operation inside Iraqi territory" Hoshiyar Zebari, Iraq's Foreign Minister

He also noted it was not unusual for troops to make "hot pursuit" raids across the mountainous border.

In recent weeks, media speculation has been high about a possible cross-border operation against members of the outlawed Kurdistan Workers Party (PKK), which uses mainly Kurdish northern Iraq as a base from which to launch attacks in Turkey.

An increased number of troops and tanks have been deployed to the mountainous border with northern Iraq, which Ankara regards as a particularly sensitive frontier.

The Turkish army said the build-up in the area was a routine seasonal operation intended to combat PKK separatists inside Turkey or trying to enter.

Turkey's parliament, now in recess in advance of July 22 elections, would have to reconvene to authorise any serious military operation in Iraq.

Asked if the foreign ministry was preparing documents for such a move, Levent Bilman, a spokesman, said, before the reports of an incursion: "At this time there is no work on such an authorisation, but Turkey is ready for anything at any time."

The reports sparked concerns among foreign investors who fear any Turkish military action could harm the country's booming economy and its relations with the US, a Nato ally.