Iranian Quds Force commander Qassem Soleimani (C) attends Iranian supreme leader Ayatollah Ali Khamenei’s (not seen) meeting with the Islamic Revolution Guards Corps (IRGC) in Tehran, Iran on September 18, 2016.

Pool | Press Office of Iranian Supreme Leader | Anadolu Agency | Getty Images

Oil prices rocketed in the morning of Asia trading hours, following confirmation by the Pentagon that Iran’s top commander was killed in a U.S. airstrike in Baghdad.

The U.S. military took the “decisive defensive action to protect U.S. personnel abroad by killing Qasem Soleimani,” a statement by the U.S. Department of Defense said Thursday night. It was a directive from the U.S. president, the DOD said.

Prices surged as high as 4%, before paring those gains. As of 11.01 a.m. during Asia time, Brent crude was up 2.88% to $68.14 per barrel, while U.S. crude rose 2.70% to $62.82 per barrel.

U.S. futures declined following that development. As of 11:14 p.m ET, Dow futures pointed to a lower open of more than 155 points.

Soleimani, who led a special forces unit of Iran’s elite Revolutionary Guards, was killed, along with Abu Mahdi al-Muhandis, the deputy commander of Iran-backed militias known as the Popular Mobilization Forces, Iraqi television and officials initially reported. He is a key figure in Iranian politics and has been blamed by the U.S. for this week’s attack of the U.S. embassy in Baghdad.

The Associated Press cited an Iraqi official, speaking on condition of anonymity, who said al-Muhandis had arrived to the airport in a convoy to receive Soleimani whose plane had arrived from either Lebanon or Syria. The airstrike occurred as soon as he descended from the plane to be greeted by al-Muhandis and his companions, killing them all.

This brings us to the precipice of a full blown shooting war with Iran — not a shadow war or a proxy war… It is almost impossible to overstate the implications of this event.

Helima Croft

Head of global commodity strategy, RBC Markets

Soleimani’s body was identified by the ring he wore, according to AP, citing a Iraqi senior politician.

The attack came amid tensions with the United States after a New Year’s Eve attack by Iran-backed militias on the U.S. Embassy in Baghdad. The two-day embassy attack which ended Wednesday prompted President Donald Trump to order about 750 U.S. soldiers deployed to the Middle East.

Helima Croft, head of global commodity strategy at RBC Markets, told CNBC via email: “This brings us to the precipice of a full blown shooting war with Iran — not a shadow war or a proxy war.”

“It is almost impossible to overstate the implications of this event,” she added.

The attack will likely “provoke significant retaliation” from Iran as well as Iranian-backed militia in Iraq, said Matthew Bey senior global analyst at Stratfor.

Iran is likely to return to backing attacks on oil infrastructure in the Persian Gulf and the rest of the Middle East, Bey told CNBC. Tehran could also consider attacks on Saudi Arabia’s oil infrastructure if tensions escalate, and it would have both the “capability” and “willingness” to attack major choke points that would “take months to rebuild” in Saudi Arabia, he said.

— CNBC’s Amanda Macias contributed to this report.

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