Global oil prices spiked to the highest levels in three-and-a-half years Wednesday following President Donald Trump's decision to withdraw from a multilateral nuclear deal with Iran and impose stiff economic sanctions as investors reacted to both a pullback in supply from one of the world's biggest producers and the prospect of escalating tensions in the Gulf region.

President Trump announced his decision to leave the Joint Comprehensive Plan of Action (JCPOA) agreement, reached in 2015, yesterday in Washington, a move that will mean the "re-imposing the U.S. nuclear-related sanctions that were lifted to effectuate the JCPOA sanctions", according to the U.S. State Department, following so-called wind-down periods of 90 and 180 days. Iran is the world's fifth largest producer, pumping more than 3.8 million barrels of crude per day, with analysts forecasting that as many as 700,000 barrels a day could be affected in a market that is already tight with supply following OPEC's extended production quota agreement from late 2016.

"We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States. "Today's action sends a critical message," ," Trump said Tuesday in his White House address. "The United States no longer makes empty threats. When I make promises, I keep them."

Brent crude contracts for July delivery, the global benchmark, were marked 0.35% higher at $76.82 per barrel while WTI contracts for June, which are more tightly correlated to domestic gasoline prices, were seen 0.55% higher from their Tuesday close in New York and changing hands at $70.90 per barrel after hitting $71.04 earlier in the session, the highest since early December 2014.

The Iran Deal is defective at its core. If we do nothing, we know what will happen. In just a short time, the world's leading state sponsor of terror will be on the cusp of acquiring the world's most dangerous weapons.... pic.twitter.com/58qwBLzxIH

— Donald J. Trump (@realDonaldTrump) May 8, 2018

U.S. gasoline prices were quoted at an average cost of $2.84 per gallon, according to the comparison website Gasbuddy.com, up 17% from the same period last year and the highest since November 2014.

"Trump's decision moves us away from the previous $60-70/barrel range in crude oil, and into a new $70-80/b range," said Saxo Bank's head of commodity strategy Ole Hansen, who noted that yesterday's surprise 1.9 million barrel decline in domestic crude stocks, as reported by the American Petroleum Institute, added to the market's bullish tone. "If we see a similar situation in today's Energy Information Administration release, expect the theme to extend, Hansen added.

Domestic oil producers and servicers were also on the rise in early market trading, with Transocean Litd (RIG - Get Report) rising 1.3% to $12.57 per share and Actions Alerts PLUS holding Schlumberger NV (SLB - Get Report) gaining 1.31% to $70.45 each. Exxon Mobil Corp (XOM - Get Report) was marked 1.01% higher at $78.88 each while rival Chevron Corp. (CVX - Get Report) added 0.3% to change hands at $126.92 a share. 

Iran's Supreme Leader,  Ayatollah Ali Khamenei, called Trump's decision "silly and superficial" in a national address Wednesday, accusing the President of "maybe more than 10 lies in his comments."

"He threatened the regime and the people, saying I'll do this and that. Mr. Trump I tell you on behalf of the Iranian people: You've made a mistake," Ali Khamenei warned.