The world’s crude oil prices traded two percent higher on Wednesday morning after U.S. President Donald Trump announced Washington would pull out of the Iran nuclear treaty on Tuesday.

Washington’s move to exit the 2015 treaty, known as The Joint Comprehensive Plan of Action (JCPOA), shakes up an already unstable Middle East and threatens to do the same to the global oil supply.

Brent crude oil futures traded at $ 76.75 per barrel, up $1.88 or 2.5 percent from the previous day. The $76.75 price is the highest since 2014.

West Texas Intermediate (WTI) rose 2.3 percent to $ 70.67 per barrel an increase of $1.61 per barrel and nearly matching the highest level in the past four years.

Killing the deal means that Washington will likely reinstate sanctions on Tehran after 180 days unless there are some deals reached before then.

Trump has repeatedly slammed the Iran deal as”the worst deal ever negotiated.” He called on his allies to fix the agreement, which he claims as a failure to address Iran’s capability of testing its ballistic missiles.

Will the sanction affect Iran’s oil export?

Senior economist at Tokyo-based Mitsubishi UFJ Research and Consulting Tomomichi Akuta said the upcoming sanctions could decrease Iran’s export by 1 million barrels per day.

“The oil supply/demand balance is roughly in balance now, but it could turn to a complete supply shortage (in case of new supply curbs). Oil prices could rise at least $10 ( a barrel), with Brent approaching near $90,” he described.

After Iran sanctions were removed in 2016 by the U.S and its allies, Iran re-emerged as one of the biggest oil exporting nations within the Organization of the Petroleum Exporting Countries (OPEC), behind Saudi Arabia and Iraq.

Iran’s crude export per April stood at 2.6 million barrels per day. Most of Iran’s oil supply is exported to Asian countries and around 600,000 barrels per day ships to Europe.

Countries importing oil from Iran will likely seek alternatives to avoid troubles with Washington.

What other experts say

Contradicting Akuta’s statement, Jay Hatfield from InfraCap’s MLP ETF stated that Iranian oil production would not likely be severely affected by Washington’s withdrawal from the nuclear deal unless Trump can persuade other allies to reimpose sanctions.

He predicts WTI prices will stay between $60 and $70 per barrel this year.

On the same day, the American Petroleum Institute (API) reported the U.S crude supply dropped by 1.85 million barrels for the week ended on May 4.

“The sanctions are not going to take so much oil off the market as to be a real big event, but it’s certainly something that supports prices,” said James Williams, President of WTRG Economics, an energy research company.

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