Oil Prices Surge, US Asks Citizens to Leave Baghdad as Tension Escalates

Hong Kong/Baghdad: Oil prices soared more than 4% on Friday following news that the US had killed a top Iranian general, fanning fresh fears of a conflict in the crude-rich region.

In Baghdad, after the Iranian leadership threatened “severe revenge”, the US Embassy urged American citizens to "depart immediately", for fear of fallout from a US strike that killed top Iranian and Iraqi commanders.

"US citizens should depart via airline while possible, and failing that, to other countries via land," the embassy said in a statement.

On Friday, the head of Iran's Quds Force, Qasem Soleimani, was hit in an attack on Baghdad's international airport, according to Hased, a powerful Iraqi paramilitary force linked to Tehran.

Later, US president Donald Trump tweeted a picture of the American flag, and the Pentagon saying he had ordered Soleimani's killing.

Brent surged 4.4% to $69.16 and WTI jumped 4.3% to $63.84 as investors grew 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," said AxiTrader's Stephen Innes.

"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 to AFP as the "coldest" in years.

Oil prices saw a record surge in September after attacks on two Saudi Arabian facilities briefly slashed output in the world's top exporter by half, with Trump blaming Iran for the attack and previous other blasts on tankers in the Gulf last year.

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 more than one percent.

High-risk currencies retreated against the greenback, with South Korea's won down 0.6%, Australia's dollar down 0.4% and the South African rand down more than 1%.

Equities were mixed, having been enjoying the second day of the year rallying on trade optimism.

Hong Kong fell 0.2% by the break, while Shanghai shed 0.3%. Singapore retreated 0.5% and Taipei dropped with Mumbai. But Seoul, Sydney, Wellington, and Manila were in positive territory.

Markets had all been well up before news of the strike, thanks to ongoing optimism fuelled by the China-US trade agreement, looser central bank monetary policies and easing Brexit worries.

China Urges 'Calm and Restraint'

Beijing: China appealed for restraint from all sides, "especially the United States", after top Iranian commander Qasem Soleimani was killed in a US strike in Iraq.

Iran's supreme leader Ayatollah Ali Khamenei vowed to take "severe revenge" after Soleimani was killed when a volley of missiles hit Baghdad's international airport, striking a convoy belonging to the Hashed al-Shaabi, an Iraqi paramilitary force with close ties to Tehran.

China has always opposed the use of force in international relations," Chinese foreign ministry spokesman Geng Shuang said at a daily press briefing.

"We urge the relevant sides, especially the United States, to remain calm and exercise restraint to avoid further escalating tensions," Geng said.

He said Iraq's sovereignty, independence and territorial integrity must be respected.

China, a permanent member of the UN Security Council, is a key partner of Iran and major buyer of the country's oil.

Geng said China urged all sides to abide by the principles of the UN charter and the "basic norms of international relations".

Iran, China and Russia held joint naval drills in the Indian Ocean and the Gulf of Oman last week and the Iranian foreign minister visited Beijing earlier this week.

China and Russia are also parties to the 2015 nuclear deal with Iran, from which Trump withdrew in May last year.