Oil prices spiked following news that a top Iranian commander had been killed in US airstrikes.
Iranian Major-General Qasem Soleimani, head of the elite Quds Force, and top Iraqi militia commander Abu Mahdi al-Muhandis were killed early on Friday in a strike on their convoy at Baghdad airport.
It prompted Iran's Supreme Leader Ayatollah Ali Khamenei to vow harsh revenge amid heightened geopolitical tensions.
Oil prices surged on news of Soleimani's death, which ramped up supply worries as the geopolitical situation deteriorated.
The global benchmark Brent crude shot 2.97 per cent higher to $68.22 per barrel, while US West Texas Intermediate crude jumped 2.81 per cent to $62.90 per barrel.
Tapas Strickland, director of economics and markets at National Australia Bank, said: "It remains very unclear exactly what impact (the U.S. strikes) could have on the equity market.
"It is significant that one of Iran's top military generals was reported to have been taken out ... but it all hinges on what Iran does in terms of retaliation."
The strikes came after IS Defence Secretary Mark Esper said there were indications that Iran - or forces it backs - may be planning additional attacks after Iranian-backed demonstrators hurled rocks at the US embassy in Baghdad.
The US strikes in Iraq and recent dollar weakness also combined to burnish the value of gold, driving the precious metal 0.84 per cent higher on the spot market to $1,541.73 per ounce, around a four-month high.
Tehran shot down a US military surveillance drone and seized oil tankers last year. It. also blames Iran for a series of other attacks targeting tankers, as well as a September assault on Saudi Arabia's oil industry that temporarily halved its production.
The tensions are rooted in Donald Trump's decision in May 2018 to withdraw the US from Iran's nuclear deal with world powers, struck under his predecessor, Barack Obama.
Reporting by Associated Press.
