The first major attack on an island that exports the bulk of Iran’s oil threatens the lifeblood of the Islamic Republic, as well as global supplies in a market already rocked by the two-week-old conflict in the Middle East.
The US bombed military targets on Kharg Island in the Persian Gulf, but spared oil infrastructure for now, President Donald Trump said in a post on his Truth Social account.
He warned Iran’s leaders that he would immediately reconsider that decision if they interfered with ships transiting the Strait of Hormuz.
Iran is heavily reliant on Kharg Island, which processes about nine out of every 10 barrels of its crude exports — mostly to China.
An escalation that could impact those flows would further rattle oil markets, after the effective shut-in of Persian Gulf supplies through the Strait of Hormuz that’s sent prices soaring more than 40 per cent since the start of the conflict.
“This will be likely to impair Iran’s ability to export — it’s Trump trying to escalate in order to de-escalate,” said Rachel Ziemba, a senior fellow at Center for a New American Security. “The biggest risk to oil markets, and the war, is whether Iran retaliates.”
The Islamic Republic’s military threatened to hit US-linked oil targets in the Middle East if Iran’s energy facilities were attacked, Agence-France Presse reported, citing comments to local media by entities linked to the Revolutionary Guard.
If Kharg Island were taken offline, it would rapidly trigger upstream production cuts and put as much as half of Iran’s oil output at risk, JPMorgan Chase & Co. said in a note dated March 8. Iran, which had previously been expected to be among the last of the Persian Gulf producers to shut in, could move ahead of Kuwait and the United Arab Emirates, the bank said.
“I suspect cargo ships will be hesitant to load cargoes when the island is under such a direct threat of military attack from the US,” said Bob McNally, president of Rapidan Energy Group, a Washington-based consulting firm. “That is especially the case if Iran is still disrupting Strait of Hormuz traffic.”
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