Helicopter gunships bombed Kurdish rebel positions in eastern Turkey on Monday while the government flexed its military muscle with massive national day parades and flypasts in major cities.
Turkey has massed up to 100,000 troops, backed by tanks, artillery, warplanes and combat helicopters, along the Iraqi border in readiness for a possible large-scale incursion to crush some 3,000 guerrillas who use the region as a base.
The White House said it was pressing Turkey and Iraq to continue talks aimed at averting a cross-border operation.
Witnesses said they saw helicopters firing rockets at suspected Kurdistan Workers Party (PKK) positions in the mountains in Turkey's border province of Sirnak on Monday. The operation was continuing after several hours.
"We are holding our breath, awaiting the order for an operation," one senior security official told the liberal Radikal daily near the border where rebels killed 12 Turkish soldiers on October 21.
One soldier was killed during the operation in southeast Turkey on Monday, Turkish broadcasters reported. Another soldier was killed in Tunceli province, hundreds of kilometres from the border, in an explosion triggered by a landmine, a favoured weapon of the outlawed PKK.
On Sunday, army sources said 20 PKK guerrillas had been killed in the Tunceli campaign.
In Ankara, warplanes swooped, tanks rolled and troops marched proudly on Monday before President Abdullah Gul, Prime Minister Tayyip Erdogan and top generals in a display of military might designed to stress Turkish unity and resolve.
Turkey has the second biggest armed forces in Nato.
Istanbul, Turkey's largest city and business hub, also staged a military parade and flag-waving patriots clapped loudly as tanks drove past.
Many people also carried pictures of Mustafa Kemal Ataturk, revered founder of the modern Turkish Republic in 1923.
"I am very proud of the 84 years of the Turkish Republic. We are not worried about the future. We are together and the republic will survive," said war veteran Ahmed Kendigel, 52.
"We are ready"
"It is our government's decision whether to go into northern Iraq but we are ready for anything. The army, the people, all of us are ready."
Turkish nationalist fervour has been rising since the deaths of the 12 soldiers, whose funerals last week turned into huge anti-PKK rallies that have greatly increased pressure on Erdogan's government to send troops into northern Iraq.
"With the news of... dead soldiers, it is more important to celebrate today than ever. We need to show today we are against the PKK and terror attacks. If we were afraid of them we would not be here," Reyhan Turan, 24, said at the Istanbul rally.
"My brother is a soldier and I am very worried for him and the others," said Turan, a student.
Newspapers delivered a strongly patriotic message on Monday.
"Turkey is on the threshold of historic decisions," said the Vatan daily, which like most newspapers carried a large picture of Ataturk against a background of Turkish flags.
"We are passing through a critical period. And in these days, as Ataturk showed us many years ago, we need unity and solidarity," it said in a typical front-page commentary.
Washington and the Baghdad government have urged Ankara to refrain from major military action in mainly Kurdish northern Iraq, fearing this would destabilise the wider region.
Turkish-Iraqi talks aimed at stopping the PKK from using northern Iraq to attack Turkey and averting a potential cross-border operation broke down on Friday after Ankara rejected a series of Iraqi proposals as ineffective.
"We obviously are encouraging the Iraqis and the Turks to continue having discussions," White House spokeswoman Dana Perino said. "They need to continue to apply the pressure to the PKK."
Iraqi Foreign Minister Hoshiyar Zebari was quoted on Monday as warning of "disastrous" consequences for stability in both countries and the wider region if Turkey invaded.
"This would be a unilateral decision and that's why people are resisting that," Zebari told the BBC in an interview.
Turkish officials say talks next Monday between Erdogan and President George W. Bush will be crucial in determining whether Turkey carries out its threats of a major cross-border offensive against an estimated 3,000 PKK rebels holed up in northern Iraq.
Turkey's tougher stance has helped propel global oil prices to record highs. The PKK, considered a terrorist group by the US, the EU and Turkey, has said it might target pipelines carrying Iraqi and Caspian crude across Turkey.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.