Saudi Arabia has admitted that critic Jamal Khashoggi was killed inside its Istanbul consulate after a physical altercation, in a major dialing back of two weeks of denials, but the whereabouts of his body remain unclear.

It said 18 Saudis have been arrested in connection with his death and two top aides of Crown Prince Mohammed bin Salman, as well as three other intelligence agents, have been sacked.

"It was a big first step. It was a good first step," Trump said of the move.

"But I want to get to the answer."

Yet Trump also warned against halting the massive arms deal with Riyadh, saying it would hurt American jobs, despite the international furor over Khashoggi's death.

"We have $450 billion, $110 billion of which is a military order, but this is equipment and various things ordered from Saudi Arabia," Trump told reporters.

"It's over a million jobs; that's not helpful for us to cancel an order like that. That hurts us far more than it hurts them," he added, noting Riyadh could obtain the weapons from other countries like China or Russia.

"But there are other things that could be done, including sanctions."

Turkish officials have accused Riyadh of carrying out a state-sponsored killing and dismembering the body, which police have begun hunting for in an Istanbul forest.

Trump has said he found the explanation credible despite continued skepticism from some US lawmakers, including Republicans.

The US president has said that Saudi Arabia is valued as a historic customer for the US weapons industry, and that the US also relies on the kingdom in the fight against terror.

But the controversy over Khashoggi's death has blown up into a major crisis for Crown Prince Mohammed, a Trump administration favorite widely known as MBS whose image as a modernizing Arab reformer has been gravely undermined.