LONDON  - Iraq's benchmark dollar bonds tested a one year low on Monday amid sharply escalating tensions across the region.

The country's 2023 issue dropped as much as 4.1 cents on the dollar in early London trading, having seen its biggest fall since issuance on Friday following the U.S. killing of Iran's top military commander at Baghdad airport.

Iraqi militia leader Abu Mahdi al-Muhandis was also killed in the attack and Iraq's parliament called on Sunday for U.S. and other foreign troops to leave the country following the moves. U.S. President Donald Trump hit back warning Iraq could be hit by sanctions "like they've never seen before". 

(Reporting by Marc Jones; Editing by Ritvik Carvalho) ((marc.jones@thomsonreuters.com; +44 (0)207 542 9033; Reuters Messaging: marc.jones.thomsonreuters.com@reuters.net Twitter @marcjonesrtrs))