Rear Admiral Alireza Tangsiri stated on Monday that if Iran is not allowed to export oil through the Hormuz Strait, it would react immediately. Global benchmark Brent rose 2.6 per cent to $73.87 a barrel after earlier touching $74.31, highest since early November.
U.S. West Texas Intermediate crude climbed by as much as 2.9 per cent to $65.87, the highest since October 31, and was last up $1.50 at $65.50.
The White House said the action is meant to bring Iran's oil exports to "zero" and remove a main source of revenue for the regime.
The US re-imposed sanctions on Iran last November, after President Trump pulled out of the landmark 2015 Iran nuclear deal. The decision means sanctions waivers for five nations, including China and India and US treaty allies Japan, South Korea and Turkey, will not be renewed when they expire on May 2.
The US' move which is seen as an escalation of President Trump administration's "maximum pressure" on Iran comes after it past year gave temporary 180-days waiver to eight countries, including India, China, Turkey and Japan among others.
The White House on Monday underlined its determination "to sustain and expand the maximum economic pressure campaign against Iran to end the regime's destabilising activity threatening the United States, our partners and allies, and security in the Middle East".
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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. That was when Washington granted significant reduction exceptions (SREs) from sanctions to countries, including India.
In September a year ago, the United States outpaced Russian Federation and Iran to become the world's largest crude oil producer for the first time in almost two decades.
India and four other remain continue to buy. The company is now waiting for an official response from the government on the waivers.
Indian refiners are also already searching for alternative supplies.
Iran's biggest oil customers are China and India, who have both been lobbying for extensions to sanction waivers. China, which relies on imports for about half of its oil, could present the toughest diplomatic challenge for the U.S. in trying to enforce its sanctions.
US President Donald Trump has chose to eliminate all waivers issued to eight economies. While the kingdom is expected to boost output again, analysts fear that the USA move - along with sanctions on Venezuela's oil industry - will leave the world with inadequate spare capacity.