"The continuing Turkish threats may result in closing the borders which would bring about large damages," said Bahaa al-Din Muhi al-Din, a 43-year-old merchant from the Kurdish city of Sulaimaniyah.

Tension between the two countries has risen since a midnight attack on Saturday by the Kurdistan Workers' Party (PKK) on a Turkish military patrol along the border that killed 12 soldiers.

The attack came just days after the Turkish parliament approved a military incursion into Iraq to flush out PKK rebels.

The Kurdish region of northern Iraq imports goods ranging from foodstuffs to electronic items from Turkey and has been trading with its neighbour in a peaceful environment compared to some other violent regions of Iraq.

But Kurdish merchants and citizens now fear that a Turkish incursion could bring instability to their region.

"The events are worrying. These threats if implemented would lead to economic troubles such as skyrocketing prices," said Asso Tilawi, a foreign exchange dealer.

"Most of the Kurds are worried, but they do not want to say it."

Iraqi Shiite MP Amira al-Baldawi warned that both countries would lose heavily from military action in northern Iraq.

"Iraqi oil exports and the Turkish port of Ceyhan would take the brunt for any hostilities," she said.

Iraq exports about 300,000 barrels of oil from northern Iraq through the Turkish port of Ceyhan.

"They (Turkey) are benefiting from Iraqi exports and they will lose if there was a halt in oil exports," she added.

Although estimates of the potential economic loss from a Turkish incursion were not immediately available, a week's closure of the Iraq-Iran border in September led to a loss of one million dollars a day for the Kurdish region.

Shamal Aziz, who owns a ranch in the remote and rugged mountains of Qandil where the PKK has bases, was also worried.

"The Turkish military may not reach our territories but we are afraid of air strikes," he said.

Aziz said he opposes the presence of the PKK in Iraq's northern Kurdish region despite sympathy for their cause.

"It is true the PKK fights for a Kurdish issue in Turkey, but it must consider the situation in Kurdistan provinces," he said.

On Monday the ethnically-volatile oil city of Kirkuk also saw protests against Ankara from local Kurdish inhabitants.

"No, No to Turkey! No, No to aggression!," cried hundreds of protesters who gathered outside the office of Kurdish leader Massud Barzani's Kurdistan Democratic Party (KDP).

"We came here to support the Kurdish government's rejection of the Turkish threats," said protester Shakiba Khorshid who works for an NGO.

Another protestor standing near her carried a banner which read: "Stop, Stop Turkey!".

Although locals have not yet resorted to stocking food and fuel supplies in case of a Turkish incursion, anti-Ankara sentiment has been running high across the Kurdish region.

"We are used to these circumstances as we have faced such catastrophies in the past. I have not stocked food or fuel," said Mohammed Taha Hamad, a local government employee from Arbil, seat of the Kurdish administration.

But he charged that the Turks "do not want to understand anything nor do they want to have a dialogue."

Arbil resident Suhail Tahir, 40, said Turkey will be the loser.

"We actually do not believe Turkey would commit such a mistake as it is the only loser. All indications show that Turkey will lose if it launches the attack."