Oil prices reached a six-month high Tuesday after the Trump administration announced it would no longer exempt countries from U.S. sanctions, if they continue to buy Iranian crude oil, a move aimed at imposing a complete oil embargo on Iran.

Waivers granted to eight countries, including big Iranian crude importers China, India, Japan, Turkey and South Korea, are due to expire on May 2.

RBC Capital Markets, a global investment bank, has told clients it anticipates a loss of 700,000 to 800,000 barrels of oil a day from markets as a consequence of the waivers-withdrawal.

That will tighten oil supplies as seasonal demand picks up in the Northern Hemisphere, forcing importers to seek alternative supplies, a search made more challenging with production falling off in Venezuela and Libya because of domestic unrest and conflict.

U.S. sanctions were snapped back on Iran last year when President Donald Trump withdrew from a 2015 nuclear deal, signed by his predecessor Barack Obama, in which Tehran agreed to nuclear curbs in return for sanctions relief.

The European Union has been at loggerheads with Washington over Iran and the nuclear deal, which the Trump administration fears only delays Iran from developing nuclear weapons.  

“Today I am announcing that we will no longer grant any exemptions,” Mike Pompeo, the U.S. secretary of state, said Tuesday.  “We’re going to zero.  We will continue to enforce sanctions and monitor compliance.  Any nation or entity interacting with Iran should do its diligence and err on the side of caution.  The risks are simply not going to be worth the benefits,” he added.

The Trump administration gave waivers last year to avoid a price spike.

Some oil analysts are predicting the price of a barrel could rise to $80 as a result of the withdrawal of the exemptions and say the Trump administration may have to release oil from the U.S. Strategic Petroleum Reserve, an emergency supply of up to 727 million barrels, if the administration wants to keep prices low.

“There isn’t much doubt about the trigger for the latest rally, with Trump’s decision not to extend waivers on imports of Iranian oil beyond May unsurprisingly providing further upward pressure,” according to Craig Erlam, an oil market analyst at OANDA, a U.S. currency brokerage.

Saudi Arabia and the United Arab Emirates have said they will in principle increase production, but are unlikely to do so before a meeting in June of the 14 members of the Organization of the Petroleum Exporting Countries (OPEC).  Analysts say they will want to wait to see the effect of the withdrawal of exemptions before committing to make up the shortfall on the international market.

Last year, OPEC countries increased production when the Trump administration first announced the return of U.S. sanctions on Iran.

Brent crude and West Texas Intermediate oil have surged in price more than 30 percent this year because of production disruptions in Venezuela, Nigeria, and Libya.

Amrita Sen, chief oil analyst of Energy Aspects, a research consultancy, says a jump in OPEC cartel production won’t necessarily keep prices in check.  “The problem we have is the quality of the crude.  Iran produces a lot of medium to heavy crudes, whereas the spare capacity in Saudi Arabia and the UAE is of lighter crudes.  The quality issue is going to become a very big problem,” she says.

One of the big questions when it comes to oil prices is whether importers decide to comply with the U.S. demand to stop buying Iranian oil.

Sen says China has made very strong statements it is within its legitimate rights to do business with Iran.  “We think Iranian exports will still be about 600,000 to 700,000 barrels per day.  And if prices rise quite substantially and compensates for the drop of 500,000 to 600,000 the revenue shortfall [for Iran] might not be that substantial,” Sen added.

Just hours after the Trump administration’s announcement that it wouldn’t renew waivers, the World Bank issued a report saying it was expecting oil prices to drop this year because of weaker global economic growth. The report, though, was drafted before the announcement and noted “the outlook for oil could be swayed by a range of policy outcomes, including whether the Organization of the Petroleum Exporting Countries (OPEC) and partners extend production cuts, the impact of the removal of waivers to the U.S. sanctions on Iran, and looming changes in marine fuel emissions regulations.”

In retaliation for the withdrawal of waivers, Iran has threatened to close the Strait of Hormuz, the only sea passage from the Persian Gulf to the open ocean and one of the world’s most strategically important maritime choke-points.  Few analysts believe Iran will follow through on its threat as it would risk a firm U.S. response and undermine Tehran’s efforts to keep Europeans wedded to the 2015 nuclear deal.

More likely is Iran will use “proxy wars” in the region, in Syria and Yemen, to retaliate, they say.

The U.S. withdrew from the nuclear deal in part because, it said, Iran was failing to act  like “a normal country.”  Trump officials laid down a dozen conditions Tehran would have to fulfill for sanctions to be lifted, including an end to all uranium enrichment, stopping its support of Hezbollah, Lebanon’s radical Shi’ite movement, and other militant groups including Hamas, Islamic Jihad, and Houthi rebels in Yemen.

 
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