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Crude oil prices jumped back to near 3 1/2-year highs on Wednesday after President Donald Trump pulled the United States out of an international nuclear deal with Iran, sparking worries about global oil supplies.

Asian shares ticked down as renewed U.S. sanctions on Tehran were seen as disruptive for many companies that have deals with Iran. Trump’s move is also seen as risking worsening already-tense relations between Iran and U.S. allies in the region.

“In the very short term, it looks as if the impact of heightened geopolitical worries was limited to oil markets. But that is not the end of the story,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“U.S. sanctions could affect various industries. And tensions between Iran and Israel look set to intensify. Those will begin to cap share prices,” he added.

West Texas Intermediate (WTI) crude futures traded at $70.57 per barrel, up 2.2 per cent and near Monday’s peak of $70.84, the highest level since November 2014.

Brent crude futures jumped as much as 2.5 per cent to a 3 1/2-year high of $76.75 in Asian trade on Wednesday.

Iran, the third-biggest producer among the Organization of the Petroleum Exporting Countries, produces about 3.8 million barrels per day (bpd), or about 4.0 per cent of the world’s oil supplies.

The U.S. Treasury said it will reimpose a wide array of Iran-related sanctions after the expiry of 90– and 180-day wind-down periods, including those aimed at Iran’s oil sector and transactions with its central bank.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent while Japan’s Nikkei fell 0.4 per cent.

While some investors drew comfort from the fact Iran pledged to remain in the nuclear deal despite the U.S. pullout, they are wary of escalating tensions in the Middle East.

Israel is on a high alert, mobilizing reserve forces while Syrian state media accused Israel of launching missiles at a target near Damascus on Tuesday just after Trump’s announcement.

In neighbouring Lebanon, Hezbollah and its political allies had just made significant gains in a parliamentary election, boosting an Iranian-backed movement fiercely opposed to Israel and underlining Tehran’s growing regional clout.

On Wall Street, caution over rising political risks was palpable. Energy shares gained 0.78 per cent and defence contractor stocks rose, with Lockheed Martin up 1.3 per cent and Northrop Grumman 3.3 per cent.

Boeing, however, fell 0.6 per cent as a deal to sell jets to Iran was seen as under threat.

The S&P500 closed down 0.03 per cent, paring earlier losses of 0.65 per cent. The Dow Industrial Average and Nasdaq were little changed as well.

Souring risk sentiment is hitting emerging markets, which have been clobbered in recent weeks by concerns about capital outflows, as the prospect of higher U.S. interest rates lures investors back to U.S. bonds rather than riskier assets.

Countries with high perceived political risks, such as Brazil and Turkey, were among the worst hit. The Brazilian real hit a near two-year low and the Turkish lira reached a record low. Since the start of this week, those currencies are down 1 per cent and 2.6 per cent, respectively.

The Indonesian rupiah hit 2 1/2-year low, and has slid 1 per cent this week.

Among major currencies, the risk-sensitive Australian dollar hit an 11-month low of $0.74245 and last stood at $0.7436 .

The euro hit a 4 1/2-month low of $1.1838 on Tuesday and last stood at $1.1860, having declined more than 4 per cent in the past three weeks.

The currency was hit by increasing prospects of an another election in Italy as the political impasse there has continued since early March’s inconclusive ballot.

The British pound stood at $1.3548, near a 4-month low of $1.3485 touched on Tuesday.

The dollar rose 0.4 per cent to 109.54 yen, edging near its three-month high of 110.05 yen touched last week as higher oil prices help to lift U.S. bond yields.

The 10-year U.S. Treasuries yield ticked up more than two basis points to 2.991 per cent.

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