(Adds more from Iran, Europe, European diplomat, Mnuchin, background)
* "Horrible one-sided deal," says Trump
* Iran says Trump's move is "illegal"
* America's European allies concerned
* Israel, Saudi Arabia welcome Trump decision
* Pullout could stoke Middle East conflicts
By Steve Holland and Yara Bayoumy
WASHINGTON, May 8 (Reuters) - President Donald Trump on Tuesday pulled the United States out of an international nuclear deal with Iran, raising the risk of conflict in the Middle East, upsetting European allies and casting uncertainty over global oil supplies.
Trump said in a televised address from the White House that he would reimpose U.S. economic sanctions on Iran to undermine "a horrible one-sided deal that should have never, ever been made."
The 2015 agreement, worked out by the United States, five other world powers and Iran, lifted sanctions on Iran in exchange for Tehran limiting its nuclear program. The pact was designed to prevent Iran from obtaining a nuclear bomb.
But Trump complains that the accord, the signature foreign policy achievement of his Democratic predecessor, Barack Obama, does not address Iran's ballistic missile program, its nuclear activities beyond 2025 or its role in conflicts in Yemen and Syria.
Trump's decision intensifies the strain on the trans-Atlantic alliance since he took office 16 months ago, especially after European leaders made trips to Washington and repeatedly appealed to Trump to preserve the deal.
The Trump administration kept the door open to negotiating another deal with allies, but it is far from clear if the Europeans would go for that and if they could convince Iran to accept it.
A Western diplomat criticized Trump's speech.
“It announces sanctions for which the first victims will be Trump’s European allies,” said the diplomat, adding that Trump’s decision would leave a lasting impression on European allies because it made clear that Trump does not care about the alliance.
The leaders of Britain, Germany and France, which were signatories to the deal along with China and Russia, said in a joint statement that Trump's decision was a cause for "regret and concern."
Underscoring the tension in the Middle East, the Israeli military went on high alert on Tuesday for a possible flare-up with neighboring Syria, which is allied to Iran.
Abandoning the Iran pact was one of the most consequential decisions of Trump's high-stakes "America First" policy, which has led him to withdraw the United States from the Paris climate accord, come close to a trade war with China and pull out of an Asian-Pacific trade deal.
It also appeared to reflect the growing influence within the administration of Iran hawks like new Secretary of State Mike Pompeo and national security adviser John Bolton, both of whom have opposed the deal in the past. Defense Secretary Jim Mattis had favored sticking with the deal, although he later tempered his views.
Iranian President Hassan Rouhani said on Tuesday that Iran would remain in the deal without Washington. Nevertheless, Trump's decision to exit the deal could tip the balance of power in favor of hardliners looking to constrain Rouhani's ability to open up to the West.
Iran denies it has tried to build atomic weapons and says its nuclear program is for peaceful purposes. U.N. inspectors say Iran has not broken the nuclear deal and senior U.S. officials themselves have said several times that Iran is in technical compliance with the pact.
Iranian state television said Trump's decision to withdraw was "illegal, illegitimate and undermines international agreements."
Renewing sanctions would make it much harder for Iran to sell its oil abroad or use the international banking system.
Iran is the third-largest member of the Organization of the Petroleum Exporting Countries and pumps about 3.8 million barrels per day of crude, or just under 4 percent of global supply. China, India, Japan and South Korea buy most of its 2.5 million bpd of exports.
According to the U.S. Treasury, sanctions related to Iran's energy, auto and financial sectors will be reimposed in three and six months.
Oil prices recouped some losses after Trump's announcement, in a volatile session in which prices slumped as much as 4 percent earlier in the day.
Brent crude futures LCOc1 settled 1.7 percent lower at $74.85 a barrel, while U.S. West Texas Intermediate (WTI) crude futures CLc1 ended the session 2.4 percent lower at $69.06 per barrel.
Wall Street remained in negative territory, while energy stocks cut earlier losses after Trump spoke.
Licenses for Boeing Co and Airbus to sell passenger jets to Iran will be revoked, U.S. Treasury Secretary Steve Mnuchin said, scuttling a $38 billion deal.
Trump said the nuclear agreement did not prevent Iran from cheating and continuing to pursue nuclear weapons.
"It is clear to me that we cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement," he said. "The Iran deal is defective at its core."
Trump said he was willing to negotiate a new deal with Iran, but Tehran already has ruled that out and threatened unspecified retaliation if Washington pulled out.
Trump's decision is a snub to European allies that are part of the Iran deal. The Europeans must now scramble to decide their own course of action with Tehran.
They urged the United States not to take steps that would make life harder for other countries that still wanted to stick to the nuclear deal with Iran.
Obama described Trump's decision to withdraw from the deal, known formally as the JCPOA, as "misguided."
"I believe that the decision to put the JCPOA at risk without any Iranian violation of the deal is a serious mistake," Obama said in a statement.
Iran's growing military and political power in Yemen, Syria, Lebanon and Iraq worries the United States, Israel and U.S. Arab allies such as Saudi Arabia.
Israel has traded blows with Iranian forces in Syria since February, stirring concern that major escalation could be looming.
The Israeli military said on Tuesday that after identifying "irregular activity" by Iranian forces in Syria, it instructed civic authorities on the Golan Heights to ready bomb shelters, deployed new defenses and mobilized some reservist forces.
An Israeli air strike targeted a Syrian army position south of Damascus on Tuesday but caused no casualties, a commander in the regional alliance supporting Syrian President Bashar al-Assad told Reuters.
Prime Minister Benjamin Netanyahu made a televised address lauding Trump's Iran policy and alluding to the tensions over Syria.
Saudi Arabia, Iran's arch-foe in the Middle East, and Washington's other Gulf Arab allies also welcomed Trump's decision.
Trump devoted part of his speech to the "long-suffering people of Iran," criticizing Iran's rulers and saying "the future of Iran belongs to its people."
(Reporting by Steve Holland; Additional reporting by Tim Ahmann, Makini Brice, Warren Strobel, Jonathan Landay and Arshad Mohammed, Patricia Zengerle, David Lawder, Mohammad Zargham in Washington, Ayenat Mersie in New York, Sybille de La Hamaide, John Irish and Tim Hepher in Paris, Parisa Hafezi in Ankara, David Milliken and Bozorgmehr Sharafedin in London and Andrew Torchia in Dubai; Writing by Alistair Bell and Yara Bayoumy Editing by Mary Milliken, Bill Trott and Peter Cooney)