President Donald Trump’s announcement that the U.S. would exit from the nuclear deal with Iran on May 8 thrust oil prices and energy stocks lower as the stock market also dipped.

Ahead of the May 12 deadline, Trump said the U.S. would withdraw despite the possibility that tensions in the turbulent region could expand and isolate America further from its European allies. The decision by Trump was not unexpected and U.S. sanctions will be reimposed on Iran immediately, including 90- and 180-day wind-down periods.

He touted the prior agreement as a “disastrous deal” that was “defective” and one enacted by President Barack Obama’s administration. Trump also said other countries could be sanctioned economically as well, but did not provide details.

The news that the U.S. would withdraw from the pact sank oil prices by as much as 3% at one point and energy stocks mirrored the decline on May 8, including ExxonMobil Corp. (XOM), BP Plc (BP) and Marathon Petroleum Corp. (MPC) while others rose after the announcement.

Instead of the oil exports going to Iran, now the shipments will head to the European Union, China, Japan and India, said Patrick Morris, CEO of New York-based HAGIN Investment Management. While this movement is a positive factor for U.S. exports in terms of volume replacement, it is very disruptive in terms of America’s relationship with many of its allies.

Many factors remain unknown at this point, such as what happens if China continues to purchase Iranian crude, he said.

This decision also runs counter to Trump’s statement regarding oil being too expensive. Currently, about 2.6 million barrels of oil are produced and exported from Iran.

His decision could set oil on the way to $80 over the next three weeks, said Morris.

“The wild card is whether Saudi Arabia and Russia will pick up the slack and produce to fill the gap,” he said. “Naturally, the longer the sanctions last, the more damage will be done to the productive capacity of the country.

The action could help prop up crude oil prices at their current levels for a while, said Bruce Bullock, director of the Maguire Energy Institute in Dallas. One major issue is that the sanctions could put approximately 1 million barrels of crude per day in the oil market at risk “in a market which is largely balanced and inventories are now low,” he said.

Oil prices and the exploration and production sector will not be affected from the sanctions because the market appears tight, said William Featherston, a Credit Suisse analyst.

“Our supply/demand balances imply a bullish outlook for crude even if Iranian production/exports are unaffected,” he said. “We continue to believe the backwardated futures curve materially undervalues long-term oil prices.”

When Iran was the subject of international sanctions between 2010 to 2016, its oil exports fell from 2.2 MMbbl/d to 1.1 MMbbl/d, but those sanctions were different and a combination of the United Nations, EU and U.S. sanctions.

The impact in the next few months to Iranian exports will be minimal or about 200 Mbbl/d by the fourth quarter. The impact will rise in 2019 as “buyers of crude are given a period of time to show efforts at reducing Iranian imports and more restrictive sanctions targeting banks that transact in Iranian oil take effect,” Featherston said.

The oil sanctions on Iran could impact less than 200,000 bbl/d immediately and will block less than 500,000 bbl/d after six months, according to the majority of analysts surveyed by New York-based S&P Global Platts. Other analysts see more risk and said the decision could disrupt as much as 1 million bbl/d of oil supply.

By the first half of 2019, 200,000 bbl/d of Iranian crude could be at risk since U.S. Allies such as Japan and South Korea would, in turn, lower their purchases in reaction to the sanctions.

"But compliance with unilateral US sanctions would be much more difficult to enforce than the multilateral measures implemented in 2012," said Paul Sheldon, Platts Analytics associate director, in a statement. "This could test the Trump administration's appetite for sanctioning foreign companies, and the term 'significant' in the sanctions legislation potentially leaves some wiggle room which could be used to avoid a trade dispute."

Iran produced 3.83 million b/d in April, according to the latest S&P Global Platts OPEC survey, up from 2.91 million bbl/d in January 2016, when the nuclear deal took effect. The country’s crude exports to Asia rose to 1.81 MMbbl/d in April, making up 67% of its total exports. China was the single largest single destination.

The demand for Iranian crude in China and India will probably remain very strong while refiners in Europe, Japan and South Korea will tread more carefully, according to S&P Global Platts. Europe purchases 700,000 bbl/d or one-third of Iran's crude exports.

The pullout from the deal now means China could choose to buy more Iranian oil in the future instead of the excess shale oil it imports from the U.S., said Blu Putnam, chief economist of the CME Group, a Chicago-based derivatives marketplace. In addition, shale producers will need to consider whether they need to increase production and hedge it based on futures prices that are six to 24 months out, which are now “significantly lower” than spot prices, he said.

“Energy ETFs are influenced by this backwardation price structure,” Putnam said.

U.S. shale producers will likely benefit from the news, said Morris.

“This would mean higher demand in Europe for U.S. crude oil, even if it’s the ultralight oil which only gets 50% yield on,” he said.

The Brent-WTI spread should not be affected, Putnam said. U.S. oil exports have connected to the WTI but an escalation in tensions in the Middle East is not predicted to widen its price differential with Brent like in the past.

During the summer driving season, gasoline prices could rise to $5 a gallon, “stoking inflation,” Putnam said.

If tensions start to escalate with other countries, oil prices could move upwards, said Patrick DeHaan, a senior petroleum analyst for GasBuddy.com, a Boston-based provider of retail fuel pricing information and data.

“Overall, I would say a range for gasoline prices could be rising as much as 25 cents per gallon,” he said. “Watch in the weeks ahead as sanctions and responses become more clear. It’s too early to say if we're 100% out of the woods.”