US STOCKS-Wall Street set to fall after U.S. kills top Iranian commander

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* Energy stocks, gold miners track higher commodity prices

* Bank stocks fall as U.S. bond yields slide

* Incyte Corp plunges as its drug fails a trial

* Futures down: Dow 0.80%, S&P 500 0.91%, Nasdaq 1.06% (Adds comment; updates prices)

Jan 3 (Reuters) - U.S. stock indexes were set to slide on Friday as investors moved away from riskier assets after a U.S. air strike in Iraq killed a top Iranian commander, sharply escalating geopolitical tensions in the Middle East.

Iran’s Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge after Qassem Soleimani, head of Iran’s elite Quds Force, was killed in the air strike in Baghdad that was authorized by President Donald Trump.

The flaring tensions sent prices of perceived safe-haven assets soaring, while threatening to derail a recent rally in stocks.

“The market is just on edge and is giving up a large portion of yesterday’s gains,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

“There is a question of what this (air strike) is going to turn into and if it’s going to be something long lasting.”

The CBOE Volatility index, an options-based gauge of investor anxiety, hit its highest level since Dec. 10.

At 8:47 a.m. ET, Dow e-minis were down 232 points, or 0.8%. S&P 500 e-minis were down 29.5 points, or 0.91% and Nasdaq 100 e-minis were down 94 points, or 1.06%.

The three main indexes closed at record highs on Thursday as fresh steps by China’s central bank to boost its economy added to investor optimism over trade.

Shares of oil majors Exxon Mobil Corp and Chevron Corp rose 0.9% and 0.8%, respectively, in premarket trading, tracking higher oil prices.

Marathon Oil Corp, Occidental Petroleum Corp and Schlumberger were some of the top gainers among S&P 500-listed stocks, rising about 3.4% and 2.0%.

American Airlines Group Inc and Southwest Airlines Co fell 2.7% and 2.1% on prospects of higher costs.

Gold prices rose 1%, driving gains in miners such as Newmont Goldcorp.

Makers of weapons also benefited, with Lockheed Martin up 1.7%.

Benchmark 10-year note yields touched their lowest level since Dec. 12.

Shares of interest-rate sensitive banks also tumbled, with Bank of America Corp and Citigroup Inc down over 1%.

Drugmaker Incyte Corp slumped 10.8% after a late-stage clinical trial of its experimental drug for treating an acute form of transplant rejection failed. (Reporting by Manas Mishra and Medha Singh in Bengaluru; Editing by Anil D’Silva)