Vladimir Petkovic’s Switzerland team dominated the match at a rain-swept Belfast but squandered a succession of chances.
The key moment came with just over half an hour to go, when Xherdan Shaqiri’s volley was blocked by Corry Evans in the box and the referee pointed to the spot, even though he appeared to have been hit on the shoulder as he took evasive action.
Ricardo Rodriguez made no mistake from the penalty spot, sending goalkeeper Michael McGovern the wrong way as the visitors finally made their superiority count to put them in the driving seat in the two-legged tie.
“The referee has no-one in his line of sight,” fumed O’Neill who must now rally his team for Sunday’s second leg in Basel.
“Corry’s arm isn’t in an unnatural position, it’s by his side. The ball hits him on the back more than anything. I thought the referee had blown for a foul or an offside. Nobody had claimed for it.”
“I’m staggered by the decision, staggered by the yellow card but there’s nothing we can do about it now. There’s anger in the dressing room in there. They feel very aggrieved about what’s happened.”
In Zagreb, Croatia cruised to a 4-1 victory over Greece to move to the brink of a spot at next year’s finals in Russia.
Real Madrid midfielder Luka Modric opened the scoring from the penalty spot in the 13th minute, after Greek goalkeeper Orestis Karnezis brought down striker Nikola Kalinic.
Croatia doubled their lead six minutes later when an unmarked Kalinic flicked in a low cross from Ivan Strinic.
The visitors pulled one back on the half-hour mark when captain Sokratis Papastathopoulos scored a header from a corner.
But just three minutes later, a quick Croatian attack down the right flank ended with Inter Milan winger Ivan Perisic powering home a close-range header at the back post.
Andrej Kramaric tapped in to increase Croatia’s lead four minutes after half-time and leave Greece with it all to do in the return fixture on Sunday in Piraeus.
“It was a great match … But this is only the first half, we should not relax. Nothing is over,” Croatia coach Zlatko Dalic told television channel HRT.
Dalic was named as coach in October after Ante Cacic was sacked following a damaging 1-1 home draw with Finland, as the team ultimately finished a disappointing second to Iceland in Group I.
“We played a great match. But we have only done half of the job, we should have a good rest and play a good match there (Greece) on Sunday,” Modric added.
“We could have scored more goals, but 4-1 is a great result.”
Croatia are looking to qualify for their fifth World Cup since 1998.
Papastathopoulos labelled the match a “horrible night” for his team.
“We made unbelievable mistakes, conceded too many goals which is not typical of us at all,” he said.
“After this, it’s practically 90 percent likely that we will not go to the World Cup.”
On Friday, four-time World Cup winners Italy take on Sweden at Solna while Saturday sees the Republic of Ireland travelling to Copenhagen to face Denmark.
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