Wires

FTSE 100 drops as Middle East tensions dent risk appetite

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* FTSE 100 down 0.4%, FTSE 250 down 0.3%

* U.S. kills Iranian major general, Iraqi militia commander

* Investors pile into oil

* Next ushers in bright start to Christmas trading updates

Jan 3 (Reuters) - London's main index fell on Friday as a U.S. air strike in Iraq stoked geopolitical tensions and drove investors away from risky assets, though oil stocks gained from a surge in crude prices.

The FTSE 100, which began the decade with solid gains, followed global peers into the red and was 0.4% lower after the air strike that killed top Iranian and Iraqi commanders. The FTSE 250 shed 0.3% by 0803 GMT.

However, Shell and BP advanced as oil prices shot up more than 3% on fears of a supply disruption.

Next, the first major UK-listed retailer to update on performance over Christmas, added 1% after better-than-expected sales through the Christmas trading period helped it nudge its annual profit forecast higher.

Peers Marks & Spencer and ASOS also rose 1% each. (Reporting by Shashwat Awasthi in Bengaluru; Editing by Arun Koyyur)