The price of the North American oil benchmark has topped $70 a barrel for the first time in more than three years on Monday, as a looming decision on whether the United States will re-impose sanctions on Iran is hanging over the market.

The West Texas Intermediate futures contract for June gained $1.01 US to settle on Monday at $70.73 US a barrel.

After troughing in the low $40s last summer, oil has marched steadily higher in recent months. The latest catalyst is escalating tensions in Iran, as U.S. President Donald Trump is threatening to walk away from a deal his predecessor signed with the country over its nuclear program.

Trump is set to decide by May 12 whether to pull out of the Iran deal, and impose sanctions again on the oil-producing nation. "All indications point to President Trump abrogating the arrangement and reintroducing sanctions," Scotiabank said last week, a development that would push the oil price higher, as Iran would no longer be able to sell its oil to the world, something which would drive up the price for everyone else's crude.

The impact could be significant. The last time the United Nations imposed similar sanctions on Iran in 2006, the price of oil shot up from $60 to $145 US, the bank noted — although there were other factors at play at the time, too.

The oil price has rallied in part because traders expect sanctions to return. So if they don't come, "I would expect a big, sharp correction," Ken Courtis, chairman of Starfort Investment, told CBC News in an email Monday.

"In that case, I would see price falling back first to $62, with 2nd target at $57, and a 3rd target as low $52-53 a barrel."

On the flipside, commodities analyst Phil Flynn of the Price Futures Group in Chicago said that if Iran's oil output is effectively blocked from the world market, the oil rally could have a ways to go yet.

"Saudi Arabia is really the only country with sufficient spare capacity to make up for the loss of Iranian oil," he said in a note to clients Monday, "and they might not be in a hurry to act because they want $80 a barrel."

Venezuelan impact

The oil price was also pushed higher by developments in Venezuela, where the economic situation seems to be deteriorating.

Venezuelan oil exports took a dive after U.S. oil firm ConocoPhillips moved to seize Caribbean assets of state-run PDVSA to enforce a $2 billion arbitration award that had been awarded in its favour. The move could further crimp PDVSA's declining oil output and exports.

Venezuela's oil output dropped to 1.5 million barrels per day in April, Flynn noted, a new low. "Venezuela is collapsing," he said.

Later on Monday, U.S. Vice-President Mike Pence was expected to announce new sanctions on the country in a speech to the Organization of American States.