Oil prices climbed to 3 1/2 year highs Wednesday after President Donald Trump pulled the US out of the Iran nuclear pact, triggering renewed economic sanctions that could reduce the oil supply of an already increasingly tight market.
Dan Eberhart, CEO of oilfield services company Canary LLC, drew a direct connection: "Withdrawing from the Iran nuclear deal will support higher oil prices".
The national average for gasoline is now $2.81 a gallon, according to the auto club AAA, and it's not even the peak driving season yet.
The U.S.is seeking to cut Iran's exports once again, giving buyers 180 days to reduce purchases from the Islamic Republic.
OPEC kingpin Saudi Arabia indicated it was ready to act. MUFG Bank said nations such as China, India and Turkey may oppose America's move, while Saudi Arabia promised to work with other OPEC members to "mitigate" the impact.
"The three or four-year period of quiet in terms of geopolitics impacting oil markets is over", said Canary's Eberhart. "However, there is still plenty of ambiguity, so investors are taking a wait and see approach now".
On Tuesday, benchmark USA crude oil dropped $1.76, or 2.5 percent, to $68.97 per barrel in NY.
The price of oil ended 2.4 percent lower Tuesday, paring some of its earlier losses.
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Elsewhere, Siemens (SIEGn.DE) rose 4.6 percent after the German industrial giant raised its full year profit guidance, offsetting worries over exposure to Iran. The global benchmark crude traded at a $6.12 premium to July WTI. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 2.78% at around $70.98 a barrel. Volumes for the contract are at the highest level since trading began on March 26.
Boeing has yet to deliver any aircraft to Iran under those deals and said that it will "continue to follow the USA government's lead".
The first wave of these sanctions, which will hit 90 days from Tuesday, will target Iran's automotive sector, its trade in precious metals, aluminum, steel, coal and carpets, its sale of Iranian rial currency and its maintenance of offshore accounts, its access to the US dollar and those seeking to purchase Iranian sovereign debt. The Iran deal is defective at its core.
While Saudi Arabia, which is said to be aiming for oil at about $80 a barrel, said it's ready to minimize the effect of sanctions on the market, the world's largest crude exporter didn't say whether it would boost output.
No one knows exactly how high prices will go.
Oil fell 2.7 percent Tuesday after CNN reported the US would pull out of the Iran deal and allow sanctions to go forward, but that they could take months to go into effect. It said Wednesday that it is studying the implications of the USA move and hopes the European Union will have a united position on the Iranian sanctions. Monday was the first time since November 2014 that WTI had climbed above $70 per barrel.
That is the view of oil and gas analysts at BMI Research, who expressed the sentiment when answering questions following a recent BMI-hosted webinar, which covered the company's 2018 oil price outlook.