Oil prices surge after US strike causes the death of Iranian general

The high-profile assassinations is now fanning fears of a conflict in the crude-rich Middle East

Photo: AP Iran's Supreme Leader Ayatollah Ali Khamenei.

Oil prices soared more than 4% Friday following news that the US had killed a top Iranian general, fanning fresh fears of a conflict in the crude-rich region, with Tehran warning of retaliation.

The head of Iran's Quds Force, Qasem Soleimani, was hit in an attack on Baghdad's international airport early Friday, according to Hashed al-Shaabi, a powerful Iraqi paramilitary force linked to Tehran. Later, Donald Trump tweeted a picture of the American flag, and the Pentagon said he had ordered Soleimani's killing.

In response, Iran's supreme leader Ayatollah Ali Khamenei warned of "severe revenge" for "the criminals who bloodied their foul hands with his blood", while the country's foreign minister called the move a "dangerous escalation".

Country's President Hassan Rouhani also warned that Iran and the “free nations of the region” will take revenge on the United States for killing Revolutionary Guards commander Qasem Soleimani.

“There is no doubt that the great nation of Iran and the other free nations of the region will take revenge for this gruesome crime from criminal America,” Rouhani said in a statement posted on the Iranian government website today.

As a result Brent surged 4.4% to $69.16 and WTI jumped 4.3% to $63.84 as investors grow increasingly worried about the effects of a possible flare-up in the tinderbox Middle East on supplies of the commodity. Both contracts later pared the gains but remained well up.

"This is more than just bloodying Iran's nose," AxiTrader's Stephen Innes told AFP. "This is an aggressive show of force and an outright provocation that could trigger another Middle East war."

The killing of Soleimani is a dramatic escalation of tensions between the United States and Iran and comes after a pro-Iran mob this week laid siege to the US embassy in Iraq following deadly American air strikes on the hardline Hashed faction. The attack on the embassy highlighted new strains in the US-Iraqi relationship, which officials from both countries have described as the "coldest" in years.

The crisis also comes as tensions between the US and North Korea worsen, with Kim Jong-un declaring a self-imposed moratorium on nuclear and intercontinental ballistic missile tests had ended, with US talks going nowhere.

"We are waking up to a less safe world than it was only hours ago, especially if we combine this with simmering tension in the Korean peninsula," Innes added.

The drama sent investors rushing for the hills and safe-haven units rallied with the yen up 0.7% against the dollar and gold climbing 1.4% towards $1,600 and a near seven-year high. High-risk currencies retreated against the greenback, with South Korea's won down 0.6%, Australia's dollar off 0.4% and the South African rand down more than 1%.

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