Industry experts said Monday that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. But that number will likely be lower, depending on how countries respond and just how much oil Iran continues to export.
President Donald Trump wants to eliminate all of Iran's revenue from oil exports, money he says funds destabilizing activity in the Middle East and elsewhere.
The announcement primarily impacts Iranian oil importers including China, India, Japan, South Korea and Turkey.
"It's difficult to imagine all exports being cut off, especially since China is still a major buyer of Iranian crude oil," said Jim Burkhard, vice president for oil markets at IHS Markit. "How China responds will go a long way to shape just how much Iranian exports are cut or not."
To make up for the Iranian losses, Saudi Arabia may increase production that the country had recently trimmed, but it "is going to use up all the spare capacity that they have, or pretty darn close to it, and that is going to leave markets feeling tight," said Shin Kim, head of supply and production analytics at S&P Global Platts.
Oil prices rose more than 2% Monday, helping to lift some energy stocks.
The price of gasoline in the U.S. was already rising and the development could raise prices further.
"We've seen that market tighten up considerably even before the Iranian news, and we're also seeing a number of refining issues in the U.S.," said Ryan Fitzmaurice, energy strategist at Rabobank.
Rising oil - and gasoline - prices can squeeze consumers, whose spending accounts for about 70% of U.S. economic output. "They can take a bite out of consumers' purchasing power," said Scott Hoyt, senior director at Moody's Analytics, where he follows consumer economics.
But unless energy prices surge considerably higher, a lot faster, Hoyt said he doesn't expect them to do much damage to the American economy. Employers are hiring, and the unemployment rate is near a five-decade low of 3.8%.
Rising prices are "coming at a time when consumers are relatively well positioned to handle it," he said. "Job growth is strong. Wage growth is healthy." And prices at the pump aren't even up much over the past year: The AAA reports that U.S. gasoline prices average $2.84 a gallon, compared to $2.76 a gallon a year ago.
Paul Wiseman in Washington, D.C. contributed to this report.
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