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)
By Manas Mishra
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 .VIX , an options-based gauge of
investor anxiety, hit its highest level since Dec. 10.
At 8:47 a.m. ET, Dow e-minis 1YMcv1 were down 232 points,
or 0.8%. S&P 500 e-minis EScv1 were down 29.5 points, or 0.91%
and Nasdaq 100 e-minis NQcv1 were down 94 points, or 1.06%.
The three main indexes .SPX .DJI .IXIC 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 XOM.N and Chevron
Corp CVX.N rose 0.9% and 0.8%, respectively, in premarket
trading, tracking higher oil prices.
Marathon Oil Corp MRO.N , Occidental Petroleum Corp OXY.N
and Schlumberger SLB.N were some of the top gainers among S&P
500-listed stocks, rising about 3.4% and 2.0%.
American Airlines Group Inc AAL.O and Southwest Airlines
Co LUV.N fell 2.7% and 2.1% on prospects of higher costs.
O/R
Gold prices rose 1%, driving gains in miners such as Newmont
Goldcorp NEM.N . MKTS/GLOB
Makers of weapons also benefited, with Lockheed Martin
LMT.N up 1.7%.
Benchmark 10-year note yields US10YT=RR touched their
lowest level since Dec. 12. US/
Shares of interest-rate sensitive banks also tumbled, with
Bank of America Corp BAC.N and Citigroup Inc C.N down over
1%.
Drugmaker Incyte Corp INCY.O slumped 10.8% after a
late-stage clinical trial of its experimental drug for treating
an acute form of transplant rejection failed.