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U.S. Oil Prices Surge to Three-Month Highs After Trump-Ordered Drone Kills Key Iranian Military Commander

Iran's vow of revenge for the killing of Major-General Qassem Soleimani has investors fearing reprisal attacks on tankers or oil facilities in the Gulf region and taking global crude prices to the highest levels in more than three months.

Global oil prices surged Friday, taking Brent crude to the highest levels in three months, as investors reacted to the killing of key Iranian military commander by a U.S. drone strike outside Baghdad.

Major-General Qassem Soleimani, who lead the Quds Force of Iran's Revolutionary Guards, was killed Thursday by a strike that was directly ordered by President Donald Trump, according to a Pentagon statement, following an attack on the U.S. embassy in Baghdad by suspected Iranian militants earlier this week. Iran's supreme leader, Ayatollah Ali Khamenei, vowed to seek revenge on American targets with the help of allies around the Muslim world, sparking concerns for potential supply disruptions and reprisal attacks on tankers and facilities in the Gulf region.  

These developments signal a worrying escalation in the Middle East with the markets now awaiting the response from Iran," said Ole Hansen, head of commodity strategy at Saxo Bank. "Decades of open and covert hostility between the U.S. supported by Saudi Arabia and Israel and Iran often finding support from Russia and China has now reached a very dangerous stage."

Brent crude futures contracts for February delivery, the global benchmark for pricing, were last see seen $2.45 cents, or 3.6% higher from their Thursday close in New York and trading at $68.70 per barrel, the highest level since the days following September's missile strike on a Saudi Aramco tanker in the Strait of Hormuz, which were largely accepted to have been carried out by Iran.

WTI contracts for the same month, which are more tightly-linked to U.S gasoline prices,  were marked $2.21, or 3.63% higher at $63.39 per barrel.

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Oil has been gaining steadily for most of the past three months, with U.S. crude prices capping the whole of 2019 with a 35% gain -- the best in three years -- amid improving U.S.-China trade prospects, a carefully brokered agreement on production cuts between OPEC cartel members and key allies such as Russia, and ongoing military and political tensions in the Gulf region.

The moves have boosted the stock prices of U.S. and European oil majors, as well, with BP Plc and Royal Dutch Shell Plc rising 1.9% and 1.5% in overnight trading in London. 

Exxon Mobil XOM shares, meanwhile, are priced to gain 1.3% at the start of trading Friday, lifting its three-month gain to around 7.7%. Chevron Corp. CVX was marked 1.2% higher at $122.85 each.