Kharg Island – through which 90% of Iran’s oil exports flow – is arguably the country’s most sensitive economic target, but the export terminal has so far remained untouched during the US-Israeli bombing campaign.
Experts say bombing or capturing the site with US forces would likely cause a sustained rise in already rising oil prices, as it would be equivalent to knocking out all of Iran’s daily crude exports.
“We may see the $120 a barrel price we saw on Monday heading towards $150 if Kharg were attacked,” said Neil Quilliam of think tank Chatham House. “It’s too vital to global energy markets.”
Although the United States has struck 5,000 targets in and around Iran, it has so far refrained from bombing the country’s oil infrastructure, although oil prices remain nearly $20 per barrel higher because fear of Iranian retaliation has effectively closed the Strait of Hormuz to tanker traffic.
Israel’s air force attacked two oil refineries and two warehouses on Saturday, plunging Tehran into what some residents described as “apocalyptic” darkness as thick black smoke descended on the capital. But there have been no attacks since then.
Kharg, a five-mile-long coral island in the Persian Gulf 43 kilometers from the mainland, is where pipelines from Iran’s oil fields in the center and west of the country end. Established by an American oil conglomerate, Amoco, it was captured by Iran during the 1979 revolution.
While most of Iran’s coast is silty and too shallow for the large crude oil tankers used by the oil industry, Kharg is close enough to deep water. Satellite images reveal huge cargo piers emerging from its eastern coast.
Normally, between 1.3 million and 1.6 million barrels of oil a day pass through Kharg, although Iran increased volumes to 3 million a day in mid-February, according to investment bank JP Morgan, in anticipation of a US-led attack. Another 18 million barrels are stored in Kharg as backup, the bank added.
Media reports have hinted at White House interest, including a brief reference in an Axios report on Saturday that officials had considered “seizing Kharg.” US Defense Secretary Pete Hegseth has not ruled out attacking Iran with ground forces, although there are no large numbers of US troops in the region.
Michael Rubin, a senior Pentagon adviser on Iran and Iraq during the George W. Bush administration, said last week that he had discussed the idea with White House officials, arguing that it could be a way to economically cripple the Iranian regime. “If they can’t sell their own oil, they can’t pay their salaries,” he said.
Before the latest US-Israeli offensive, most of Iran’s crude oil from Kharg was exported to China. But the interconnected nature of the market means that a permanent loss in exportable supply would hit prices globally, at a time when another 3.5 million barrels a day, mostly from Iraq, are also out of commission due to the closure of Hormuz.
Destroying Kharg or damaging the export site “risks causing an economy-shaping oil price rise that does not fall quickly,” argues Lynette Nusbacher, a former British army intelligence officer. Israel did not attack it in last summer’s 12-day war, and its complex infrastructure could take years to repair.
There is also a longer-term political argument. “Kharg Island is important enough to the Iranian economy that destroying its facilities would abandon any pretense of waging war to create a better future for Iran,” Nusbacher argues, because it would deny a successor regime vital oil revenues.
An effort to seize the island, given its size, would likely require a sizeable and sustained operation, larger than a typical special forces raid. Although in theory a US seizure would give the White House leverage over Tehran, Quilliam argued that such an effort was very likely to backfire.
“If the United States seized it, then the Iranian oil industry would be separated. Iran would have production but could not export, while the United States would not be able to produce. That would put the markets in a tailspin; it is a real confrontation,” the analyst said.
