A general view of the Kharg Island oil terminal port, 25 km off the Iranian coast and 483 km northwest of the Strait of Hormuz in the Persian Gulf in Iran on March 12, 2017.
Anadolu | Anadolu | getty images
The possibility of a US move to capture Kharg Island, a strategically important hub often referred to as Iran’s “oil lifeline”, is considered extremely risky from both a geopolitical and economic perspective.
The five-mile-long coral island, which lies about 15 miles off the coast of mainland Iran in the waters of the northern Persian Gulf, has remained untouched by nearly two weeks of US and Israeli-led strikes against Iran.
The Trump administration has discussed seizing the island, according to one axios report on March 7, citing four unnamed sources with knowledge of the discussions.
White House officials have previously said they expect oil prices to drop dramatically after Operation Epic Fury ends, while White House press secretary Carolyn Leavitt has said the president is “wise” keeping all options on the table.
Kharag Island is in the global spotlight as it is considered one of Iran’s most sensitive economic targets. The terminal handles approximately 90% of the country’s crude oil exports and has a loading capacity of approximately 7 million barrels per day.
Analysts say any attempt to attack or seize it would require ground military action, which the US appears reluctant to undertake. An attack would also likely lead to a sustained rise in already rising oil prices.
US Defense Secretary Pete Hegseth had previously ruled out deploying US ground forces to Iran, but said the US would not yield to any pressure on the country.
Francis Galgano, an associate professor and military geography and environmental security expert at Villanova University of Pennsylvania, said Kharg Island’s location is important because it is located in deep water that enables the approach of oil supertankers.
“I would wear my war hat… If the objective is to win the war (quickly), you destroy or capture Kharg immediately,” Galgano told CNBC by email. He said any such effort would yield maximum benefits for Tehran.
Still, capturing the small island would be no small feat, Galgano said. “This would involve moving a significant number of ground combat troops into the area… My estimate would be around 5,000 troops to capture the island.”
He added: “All this certainly affects global oil markets, but they are already being affected.”
Oil prices have been extremely volatile since the US and Israel launched airstrikes on Iran on February 28. Iran has retaliated by targeting ships trying to pass through the Strait of Hormuz, with several incidents reported in recent days.
The narrow waterway is a major sea corridor that connects the Persian Gulf and the Gulf of Oman. About 20% of global oil and gas typically passes through it.
International benchmark Brent crude futures for May delivery were trading 1% lower at $99.45 a barrel on Friday, while US West Texas Intermediate futures for April delivery were last seen 2% lower at $93.81.
If Kharg Island was disabled, analysts say JP Morgan Said that the loss of Iran’s storage buffer and lack of viable export options “will trigger rapid upstream shut-ins in key southwest sectors.”
“With production around 3.3 Mbd and exports around 1.5 Mbd, half of national production could be at risk if the hub remains offline, and the previously assumed 20-day buffer will disappear from day one,” he said in a note published on Sunday.
security control
Richard Goldberg, senior adviser at the Foundation for Defense of Democracies, a nonprofit research organization considered hard on Iran, said he understood the hesitation to do anything that could derail Iranian oil production at a time when markets are nervous and the possibility of regime change still remains.
“This could change rapidly as we take back security control of the Strait of Hormuz and we get a clearer picture if the regime is able to hold on to power for a while longer,” Goldberg told CNBC by email.
“At that point we need to consider disabling the export terminal or otherwise cutting off the regime’s financial lifeline indefinitely,” he said.
Satellite view 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 the end of the Iran war is not near, reportedly saying the US has “ammunition and enough time” to fight.
His comments come after Iran’s new supreme leader Mojtaba Khamenei also struck a defiant tone as he insisted the Strait of Hormuz should remain closed as a “tool to exert pressure on the enemy”.
Iran’s sheer scale and mountainous topography means that the US would need hundreds of thousands of troops to muster any conventional ground forces in the region, According To Alex Plitsas, a senior non-resident fellow at the Atlantic Council think tank.
“Any use of ground forces will be limited to special operations forces for specific operations,” Plitsas said in a note Wednesday, without specifically mentioning Iran’s Kharg island.
— CNBC’s Michael Bloom contributed to this report.