Panoramic view of the Kharg Island port oil terminal, 25 km from the Iranian coast in the Persian Gulf and 483 km northwest of the Strait of Hormuz, Iran, March 12, 2017.
Anadolu | Anadolu | Getty Images
The possibility that the United States would attempt to seize the strategically important Kharg Island, also known as Iran’s “oil lifeline,” is considered an extremely high risk from both geopolitical and economic perspectives.
The eight-mile-long coral island, located in northern Persian Gulf waters about 25 miles off mainland Iran, has been left untouched by nearly two weeks of U.S. and Israeli-led attacks on Iran.
The Trump administration is discussing occupying the island, Axios reported on March 7, citing four anonymous sources familiar with the discussions.
White House officials have previously said they expect oil prices to fall dramatically once Operation Epic Fury ends, but White House press secretary Caroline Leavitt said the president is “wisely” keeping all options on the table.
Khalgh Island has attracted global attention as it is considered one of Iran’s most sensitive economic targets. The terminal accounts for about 90% of the country’s crude oil exports and has a loading capacity of about 7 million barrels per day.
Analysts say attacking or occupying the island would require a ground force operation, something the United States appears reluctant to do. An attack could also prompt a sustained rise in already high oil prices.
U.S. Defense Secretary Pete Hegseth has not previously ruled out sending U.S. ground forces to Iran, but has said the U.S. will not get mired in Iran.
Francis Gargano, an associate professor at Villanova University in Pennsylvania and an expert on military geography and environmental security, said Kharg Island’s location is important because it is located in deep water, allowing access for oil supertankers.
“I put on my military hat…if the goal is to win the war[quickly]destroy or occupy Qarg immediately,” Gargano told CNBC in an email, adding that such an effort would create maximum leverage against Tehran.
Nevertheless, capturing a small island is no mean feat, Gargano said. “That would require moving a significant number of ground combat forces into the area…I estimate there would be around 5,000 to capture and hold the island.”
“All of this will of course impact the global oil market, which is already being affected,” he added.
Oil prices have been extremely volatile since the US and Israel began airstrikes against Iran on February 28th. Iran has retaliated by targeting ships attempting to pass through the Strait of Hormuz, with several incidents reported in recent days.
This narrow waterway is an important maritime corridor connecting the Persian Gulf and the Gulf of Oman. Typically, about 20% of the world’s oil and gas passes through it.
International benchmark Brent crude oil futures (for May delivery) were trading 1% lower at $99.45 a barrel on Friday, while U.S. West Texas Intermediate (for April delivery) was last trading 2% lower at $93.81 a barrel.
If Kharg Island is disabled, the analyst JP Morgan He said the loss of Iran’s storage buffer and lack of viable export alternatives “will rapidly trigger upstream closures across major fields in the Southwest.”
“With production at nearly 3.3 million barrels per day and exports around 1.5 million barrels per day, half of domestic production could be at risk if sites remain offline, and the previously envisaged 20-day buffer will disappear from day one,” they said in a note published on Sunday.
security management
Richard Goldberg, a senior adviser at the Foundation for Defense of Democracies, a nonprofit research organization seen as hawkish on Iran, said he understands the reluctance to do something like halt Iranian oil production at a time when markets are unstable and regime change is still a possibility.
“Regaining security control over the Strait of Hormuz could change the situation quickly, and a little more control of the administration would provide a clearer picture,” Goldberg told CNBC in an email.
“At that point, we should absolutely consider disabling the export terminal or cutting off the regime’s financial lifeline indefinitely,” he added.
Satellite image of Kharg Island, located in the Persian Gulf off the coast of Iran.
Gallo Images | Gallo Images | Getty Images
US President Donald Trump suggested on Friday that an end to the Iran war is not imminent, reportedly saying the US “has ammunition and plenty of time” to continue the fight.
His comments came shortly after Iran’s new supreme leader Mojtaba Khamenei also struck a defiant tone, insisting that the Strait of Hormuz must remain closed as a “means to put pressure on the enemy.”
Alex Prisas, a non-resident senior fellow at the Atlantic Council think tank, said Iran’s huge size and mountainous terrain mean the United States would need hundreds of thousands of troops to mobilize conventional ground forces in the region.
“The use of ground forces will likely be limited to special operations forces for specific missions,” Pritsas said in a memo Wednesday, without specifically mentioning Iran’s Kharg Island.
—CNBC’s Michael Bloom contributed to this report.
