President Trump announced Monday that he will put a stop to exemptions for countries that are still buying oil from Iran, the world’s fourth biggest oil producer.

On Monday, Trump tweeted: “Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil. Iran is being given VERY BAD advice by @JohnKerry and people who helped him lead the U.S. into the very bad Iran Nuclear Deal.”

The U.S. had granted eight countries a 180-day waiver to buy Iranian crude oil, despite existing U.S. sanctions on the country. May 2 was the deadline for renewing those waivers. U.S. allies, plus Turkey, Japan, South Korea, India and China will no longer have waivers to buy oil from Iran.

“ Gasoline prices have already reached as high as $4.70 a gallon in some parts of California, according to the American Automobile Association. ”

“The Trump administration and our allies are determined to sustain and expand the maximum economic pressure campaign against Iran to end the regime’s destabilizing activity threatening the United States, our partners and allies, and security in the Middle East,” the White House said Monday.

National gasoline futures jumped by 7 cents a gallon in a matter of hours. Gasoline prices have already reached as high as $4.70 a gallon in some parts of California, according to the American Automobile Association. “Gasoline is moving aggressively higher,” said Philip Streibel, energy-market strategist at futures brokerage firm R.J. O’Brien.

“We’re seeing crazy prices for gasoline out here in California,” added Karl Brauer, economist for Kelley Blue Book. In some places, he said, “they’re nearing $5.” To be sure, those prices are outliers, economists say, and California is the country’s most expensive gasoline market, due to taxes, other costs, and environmental regulations.

On Monday, Trump tweeted: ‘Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil.’ Getty Images

Don’t miss:Oil prices jump over 2% as U.S. says waivers on Iran oil imports ending

But the statewide average had already broken above $4 a gallon. The national average was $2.84 before Monday’s news. “We (could) possibly see gasoline prices flirting with $3 a gallon over the summer” if global supplies tighten, said Jeanette Casselano, spokeswoman at the American Automobile Association. “I think we’re going to start to see an immediate impact.”

Last year, when the first rumors broke about sanctions, they caused a surge in oil and gasoline prices. The national average at the start of the year was just $2.23 a gallon.

“ Iran is a massive player in the oil market. It’s the world’s fourth largest producer of oil, pumping five million barrels a day or about 5.4% of global supply. ”

“This decision to bring Iran’s oil exports to zero, denying the regime its principal source of wealth,” said White House spokeswoman Sarah Huckabee Sanders in a statement. Israeli Prime Minister Benjamin Netanyahu immediately cheered the news.

There was immediate reaction in the financial markets, which try to predict where gasoline prices are headed. The president’s move will add 7 cents a gallon to gasoline in May, 6 cents in June and 5 cents through the rest of the summer, according to the initial moves at the CME futures market.

Early Monday, the price of West Texas Intermediate crude oil increased by nearly $2 per barrel to nearly $66. Jim O’Sullivan, chief economist at High Frequency Economics, a U.S.-based economic research consultancy, says each $10 rise in crude oil adds about 24 cents to a gallon, and 0.3 percentage points to the official Consumer Price Index.

Iran is a massive player in the oil market. It’s the world’s fourth largest producer of oil, pumping five million barrels a day or about 5.4% of global supply, according to data compiled by oil giant BP BP, -2.76% . Cutting off some or all of that would have an out-sized effect on prices because the markets are so finely balanced between supply and demand, say economists.

A mere 3% rise in world oil demand between 2005 and 2008 helped double crude oil prices, BP data show. And a 5.6% surge in production between 2013 and 2015 caused oil prices to collapse by about two thirds.

“ The price reactions have been muted because markets think Iranian oil will still find it’s way to market, just as it did during the hostage crisis of 1979-1980. ” — —James Bianco, head of Bianco Research

James Bianco, head of Bianco Research, warns that oil and gasoline prices will shoot a lot higher if the market starts to believe the sanctions will actually work. Right now, he says, the price reactions have been muted because markets think Iranian oil will still find it’s way to market, just as it did during the hostage crisis of 1979-1980. “There is a belief that it will get out,” he says.

Iran’s biggest oil customers are China and India. But anyone who thinks sanctions will only affect them is likely to be disappointed, say economists. Oil is a commodity, meaning one barrel is the same as another, and the market is global.

If India and China can’t get their oil from Iran, they will have to get it from somewhere else. If the global price goes up, “American” oil companies — meaning multinational oil companies that happened to be domiciled in the U.S. — will charge U.S. consumers the same as anyone else.

Bianco says higher oil prices are a net positive for the U.S. economy, because the U.S. is now on a par with Saudi Arabia as an oil producer. U.S. oil output has roughly doubled in 10 years, he says, from around six million barrels a day to 12 million barrels a day.

The sanctions are good news for Saudi Arabia and Russia, which are heavily dependent on oil exports. They’re also excellent for oil companies, including such U.S. bellwethers as Exxon XOM, -3.20% and Chevron CVX, -4.74% .