Turkey's main stock index opened 6 percent down on Monday after a major rebel attack on Turkish soldiers increased pressure on the government to launch a cross-border incursion into northern Iraq.
The main index traded 5.9 percent weaker at 52,218 points. The lira also weakened about 3 percent.
On Sunday Kurdish guerrillas killed 17 Turkish soldiers, prompting Ankara to vow it would pay "whatever price necessary" to defend itself. But Prime Minister Tayyip Erdogan also said the United States had asked for a few days pause before any response.
Last week Turkey's parliament authorized its troops to conduct operations in northern Iraq against Kurdish rebels who use the region as a base from which to attack Turkey.