Trump’s Iran Sanctions to Shake Up Global Oil Supply Lines

Washington’s decision to reinstate Iranian sanctions is likely to slowly cut off a chunk of the world’s crude supply—a shift that could redraw global supply lines and require Iran’s big customers to find alternative sources.

The Trump administration’s move rattled oil markets, sending international crude up sharply after bouncing wildly in the lead-up to the decision. Midday in Europe, international crude was up 2.7% to $76.87 a barrel on London’s Intercontinental Exchange, trading at its highest level in 3½ years.

In an effort to limit short-term pressure on prices, the U.S. said buyers will have until November to stop shipments, and Washington held out the prospect of exemptions for countries that reduced their Iranian purchases significantly, without providing specifics.

Treasury Secretary Steven Mnuchin said Tuesday the U.S. negotiated ahead of time with oil-producing allies to boost output and keep prices in check. Saudi Arabia, a longtime regional rival of Iran and a fierce competitor for global oil market share, said late Tuesday it was ready to step in to stabilize markets.

Still, some big global buyers will need to find new supplies. Iranian oil exports amounted to about 2.7 million barrels a day in April, or almost 3% of global demand.