An architect needs Claude to reason through a complex multi-step financial analysis, then call a get_market_data tool with specific parameters derived from that reasoning, incorporate the tool result, and reason further before producing a final report. The team is evaluating extended thinking for this use case. What is the correct design for extended thinking with interleaved tool use?

C is correct because Claude's extended thinking supports interleaved tool use: the model can produce a thinking block, then emit a tool_use block to call an external function, receive the tool_result in the next turn, and continue with additional thinking before the final answer. This is the intended pattern for complex agentic reasoning tasks. A is wrong because tool definitions are not placed in the system prompt — they are passed via the tools parameter in the API request, and the 'automatic interleaving without configuration' claim is misleading. B is wrong because it incorrectly states that tool calls can only occur after thinking is complete; interleaving is supported, not prohibited. D is wrong because extended thinking and tool use are not mutually exclusive — this is a common misconception and chaining two separate calls would break the continuity of the reasoning chain.