Iran-Israel Conflict: Will Attack on Kharg Oil Island Trigger Global Crisis?
Washington D.C. – A small island, smaller than the German island of Norderney, with just 10,000 inhabitants. Yet Kharg Island in the Persian Gulf is at the center of a conflict that could send global energy markets spiraling. Approximately 90 percent of Iran’s crude oil exports pass through the oil terminal on this barren island, located 30 kilometers off the Iranian coast. Control of Kharg equates to control of Iran’s economic lifeline.
On Friday, , U.S. President Donald Trump announced that U.S. Forces had “totally obliterated” every military target on the island. Fifteen explosions were heard on Kharg, according to Iranian news agency Fars. However, the island’s oil infrastructure remained intact. Trump boasted on Truth Social that the bombing raid was one of the most powerful “in the history of the Middle East,” even as simultaneously warning that he would “immediately reconsider” his decision to spare the oil facilities should anyone interfere with the free passage of ships through the Strait of Hormuz.
Why Kharg Island is Vital to Iran
The strategic importance of the island cannot be overstated. Before the 1979 Islamic Revolution, Kharg was considered the most modern oil terminal in the world. Even half a century later, nearly all Iranian oil still transits through the island. The reason is simple: the waters off the Iranian mainland are not deep enough for the largest tankers. Iran pipelines its crude oil to Kharg for loading and shipping to the world.
The consequences of destroying the oil infrastructure on Kharg would be devastating – and not just for Iran. Approximately 20 percent of the world’s oil and gas supplies are transported through the Strait of Hormuz. Iran’s Revolutionary Guard continues to threaten closure of the waterway, a move that is already severely disrupting traffic.
The situation is further complicated by rising oil prices. , the price of oil briefly surpassed $120 per barrel. The average price of gasoline at U.S. Pumps rose by 51 cents per gallon within a week, and in Germany, the price of gasoline exceeded €2 per liter. Analysts predict that a prolonged blockage of the Strait could drive oil prices as high as $150 per barrel. Iranian military officials have warned that should its oil infrastructure be attacked, “all relevant U.S. Facilities in the region will be destroyed,” according to Press TV.
Trump Spares Iranian Oil Industry – Netanyahu Does Not
What we have is precisely why Trump has, for now, refrained from damaging Iran’s oil infrastructure. A blocked Strait of Hormuz is already putting significant pressure on oil prices. Sources within the White House believe there are three to four weeks to achieve objectives in Iran before oil prices turn into a permanent political problem – a dangerous calculation as the U.S. Midterm elections approach.
However, this calculation relies on a variable Washington cannot control: Israel. While the U.S. Is careful to avoid permanently damaging Iran’s oil industry, the Israeli Air Force bombed 30 fuel storage facilities in Iran on . Large plumes of smoke rose over the Iranian capital, and black rain subsequently fell.
The attacks caused significant irritation in Washington. A Republican Senator, Lindsey Graham, urged caution regarding target selection, stating that the goal is to liberate the Iranian people in a way that does not compromise their ability to rebuild when the regime collapses, and that the oil industry will be central to that process.
Several U.S. Officials, speaking to Axios, expressed surprise at the scope of the Israeli strikes. While Israel had shared its intentions with Washington, the extent of the attacks exceeded expectations. The Wall Street Journal reported that the U.S. Had urged Israel to refrain from attacking oil facilities.
An Attack on Kharg: An Oil Price Shock That Could Last Years
This is where the real risk lies. For Israel, the issue is not the oil price. For Prime Minister Benjamin Netanyahu, the goal is to inflict lasting damage on Iran. Israeli military spokesperson Nadav Shoshani emphasized that the targeted fuel storage facilities were “directly and regularly” used for military infrastructure. However, the line between military and civilian oil infrastructure is blurred in wartime.
Ellen Wald of the Atlantic Council Global Energy Center warned that “as long as Iran has the ability to export oil, it will not allow anyone else to take that opportunity away from it – because it knows that its own oil infrastructure will be destroyed.” Should this deterrent fail – for example, through an Israeli attack on Kharg – the last restraint would be lost.
Iranian armed forces have already made their position clear. Should the U.S. Or its allies attack Iran’s oil, economic, or energy infrastructure, “all relevant U.S. Facilities in the region will be destroyed.” Jakob Schlandt of the Hamburg Institute for International Economics cautioned that even a few drones or mines could disrupt tanker traffic.
Were Israel to destroy the oil facilities on Kharg, the impact would not be limited to Iran. It would affect the entire global economy. Iran would not only be deprived of the ability to export oil, but would likely attempt to deny that ability to its neighbors as well. Such a chain reaction could trigger an oil crisis far exceeding that of 1973.
The irony is stark. Trump’s aim with the conflict with Iran was to expand American oil dominance. Instead, his closest ally, Israel, could be responsible for driving oil prices out of control for years to come.