The decision to pull out of what Trump has labeled "the worst deal ever" should have major consequences for Iran's oil industry, which has raised oil output from 2.7 million barrels per day to 3.8 million since President Obama signed the agreement to lift economic sanctions in return for an end to Iran's pursuit of nuclear weapons. The deal fed a growth in oil exports from 1.1 million bpd during the previous period of sanctions to 2.2 million bpd in March. Iran must have expected Trump's move, because in April they sold all the oil they could, ramping exports to 2.9 million bpd, according to Bernstein Research.

William Featherstone, analyst at Credit Suisse, said before the announcement that a snapping back of sanctions on Iran could reduce its oil output by about 200,000 bpd in the near term. But even if Iran had to give up all of its gains and return to pre-deal output levels, don’t expect any lasting oil price spike.

That’s because the world remains awash in oil. No doubt OPEC has worked hard to mop up excess inventories in the past two years by restricting output. Global inventories have shrunk from 325 million barrels above 5-year averages down to just 30 million barrels.

But holding inventories is different from holding spare production capacity. In the event that Iranian oil exited the market in a hurry, the Saudis have throttled back enough wells that they are sitting on an estimated 1.7 million bpd of untapped capacity. The Kuwaitis have another 300,000 bpd they could bring back online.

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