LONDON: Oil prices surged on Wednesday to levels not seen in more than three years after President Donald Trump pulled the United States out of the Iran nuclear deal, resulting in sanctions on the Islamic Republic's crude exports.
The main crude futures contracts had already been rising in recent weeks, hitting 3.5-year highs, on expectations Trump was going to withdraw from the 2015 pact that had opened up Tehran's atomic programme in return for an easing of sanctions.
"The geopolitical repercussions of this decision will no doubt be widely felt, and due to as many as one million barrels of crude supply per day being effectively taken off the market," said David Cheetham, chief market analyst at traders XTB.
Trump's decision alone was unlikely to have a major impact on the world's oil supply, said Thomas Pugh, commodities economist at Capital Economics.
"However, geopolitical tensions have intensified and if Iran decides to pull out of the nuclear deal, the impact on oil supply could be more severe," he said, predicting that oil prices would probably "remain elevated for the next few months at least".
Oil's surge in turn helped lift shares prices in energy majors, with Royal Dutch Shell and BP sharply up in London.
"Both these firms have seen their share price rise to its highest level in several years," said Cheetham.
London's FTSE was higher in mid-afternoon Europe, as Paris and Frankfurt slipped, weighed down by a stronger euro against the dollar.
- Up to $80 a barrel? -
Wall Street rose in early action in New York.
Saudi Arabia, the world's largest oil exporter, has meanwhile said it will take all necessary measures to prevent supply shortages.
Trump reinstated US sanctions which could curtail Iran's ability to export oil, its mainstay for public revenues.
US withdrawal from the accord, which had been agreed by Britain, China, Germany, Russia and the Obama administration -- was confirmed as Trump called it "defective at its core".
Iran's President Hassan Rouhani said his country could resume uranium enrichment "without limit" but would discuss its response with the other signatories before making a decision.
With the move already priced into markets, oil's main contracts, Brent and WTI, sank soon after Tuesday's announcement, with some commentators suggesting Trump could still pedal back on some of his rhetoric and shift to a more diplomatic tone.
However, they bounced back strongly in Asian deals Wednesday and then in Europe.
There was talk that crude could continue rising to $80 a barrel, with gains helped also by uncertainty in oil-rich Venezuela, an OPEC-Russia output cap, improving global demand and data pointing to a drop in US energy stockpiles.
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