Brent crude futures rose as much as 3.3 percent to $74.31 a barrel, the highest since Nov. 1, before easing back to $73.63 by 0604 GMT, which was still up 2.3 percent from their last close.
U.S. West Texas Intermediate (WTI) crude futures climbed by as much as 2.9 percent to $65.87 per barrel, the most since Oct. 31. They were at $65.50 at 0544 GMT, up 2.3 percent from their previous settlement.
News that the United States is preparing to announce on Monday that current buyers of Iranian oil would no longer be given waivers to sanctions was first reported on Sunday by the Washington Post.
Secretary of State Mike Pompeo will announce "that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate", a columnist for the newspaper said, citing two State Department officials that he did not name.
A person familiar with the situation confirmed to Reuters that the report was accurate, although a State Department spokesman declined to comment.
Prior to the re-imposition of sanctions, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
The United States put the sanctions back on Iranian oil exports after President Donald Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers.
Washington, however, granted Iran's eight main buyers of oil, mostly in Asia, waivers to the sanctions which allowed them limited purchases for six months.
Analysts said the end to the exemptions would hit Asian buyers hardest.
"(Removing waivers) is not a good policy for Trump," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corporation (JOGMEC), adding that "concerns over tightening global oil supply and lower excess production capacity are expected to bolster oil prices".
He said that Brent prices were likely to rise toward $86.29 a barrel, the highest point they reached in 2018, while WTI may climb to $76.41.
Iran's biggest oil customers are China and India, who have both been lobbying for extensions to sanction waivers.
South Korea is a major buyer of Iranian condensate, an ultra-light form of crude oil on which its refining and petrochemical industry relies heavily.
ALREADY TIGHT
Removing the sanctions exemptions would reduce oil supply from a market that is already tight because of U.S. sanctions against Iran and fellow OPEC-member Venezuela.
Additionally, OPEC, along with other global oil producers, have already imposed supply cuts since the start of the year aimed at tightening global oil markets and propping up prices.
As a result, Brent prices have risen by more than a third this year, while WTI has climbed more than 40 percent over the same period.
JOGMEC's Nogami said OPEC's leading producers "Saudi (Arabia), the United Arab Emirates and Kuwait need to boost output to cover the shortfall" from Iran, warning Brent prices could rise to the mid-$80 per barrel if no alternative supply was found.