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ARBIL, Iraq, July 19 (Reuters) - Turkey's army heavily shelled Kurdish rebel targets just inside the border of northern Iraq on Wednesday, Kurdish officials said on Thursday.

Iraq's government condemned the latest shelling of its semi-autonomous Kurdistan region and urged Turkey to hold talks to resolve Ankara's concerns about rebels from the Kurdistan Workers Party (PKK) who are based in the border area.

Jabar Yawer, deputy minister for security forces in Iraq's Kurdistan, said about 100 shells were fired around the town of Zakho in northern Iraq. No one was hurt but many residents were forced to flee, he told Reuters.

The barrage followed the killing of three Turkish soldiers when their vehicle hit a rebel landmine near the border with Iraq, he said.

Iraqi Kurdish officials said they were not aware of Turkish war planes carrying out bombing raids on Wednesday although some witnesses said they saw a plane bomb a mountain top.

Turkey, which never comments on reports it has carried out such military action, accuses PKK militants of using bases in the mountains of northern Iraq to strike at its forces.

The PKK took up arms against Turkey in 1984 with the aim of creating an ethnic Kurdish homeland in the country, home to up to 15 million Kurds. More than 30,000 people have been killed in the conflict.

The Iraqi government, without specifying dates, said it "regrets Turkish military operations that are using artillery and war planes to bomb Iraqi border villages and cities in Dahuk province".

"The Iraqi government calls on Turkey to stop these operations to return to dialogue and understanding," the statement said.

The Turkish army has raised troop levels in the country's restive southeast to 200,000, security sources say. It refuses to rule out the possibility of a cross-border operation.

Turkey's military is known to sometimes shell PKK targets inside Iraq, as well as stage small raids across the border.

Rumours of a possible Turkish incursion into neighbouring, mainly Kurdish, northern Iraq have rattled financial markets and have drawn warnings from the United States, Ankara's NATO ally, to stay out.

The Turkish troop movements have come before a bitterly contested campaign for Turkish parliamentary elections on Sunday which has triggered an upsurge in nationalism and could strengthen those who demand stronger action against the PKK.

Washington fears any major operation by Turkey in northern Iraq could stoke wider conflict in a relatively peaceful region of the war-torn country.

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