Why Kharg, a tiny island in the Gulf, matters in the war on Iran

Kharg Island, a scrubby stretch of land in the northern Gulf, roughly 30 km off Iran’s coast in Bushehr province, is far more significant than its size suggests.

The 20-square-kilometre island functions as Iran’s principal oil export terminal and handles almost all of Iran's crude exports. It collects oil coming by pipeline from Iran’s largest producing fields, including Ahvaz, Marun ​and Gachsaran.

Storage capacity on Kharg is estimated at roughly 30 million barrels and, according to Kpler, approximately 18 million barrels of crude are currently stored on ⁠the ​island, equivalent to roughly 10-12 days of exports under ​normal conditions.

Yet, Kharg has so far been left untouched by US and Israeli strikes in the ongoing war on Iran.

Iran, the third largest producer in the Organisation of the Petroleum Exporting ​Countries, pumps about 4.5 percent of global oil supplies, with output of about 3.3 million ​barrels per day of crude, plus 1.3 million bpd of condensate and other liquids.

In the days ​leading up to ⁠the US-Israeli attack, Iran ramped up exports from Kharg to near record levels, loading over 3 million bpd over February 15-20, ​nearly triple its normal export pace of around 1.3 million to ​1.6 million ⁠bpd, according to JP Morgan.

"A direct strike ​would immediately halt the bulk of Iran’s crude exports, likely triggering severe ​retaliation in the Strait of Hormuz or against regional energy infrastructure," ⁠JP Morgan said.

During the 1979 Iran hostage crisis, US President Jimmy Carter imposed sanctions on Iran but refrained from ordering strikes ​on the island. His successor, Ronald Reagan, during the 1980s Iran-Iraq Tanker War, prioritised ​protecting shipping and targeting Iranian vessels and missile batteries, leaving Kharg untouched.

Kharg underwent key developments during Iran's oil expansion in the 1960s and 1970s, with much of the country's coast too shallow for supertankers. 

Iran has looked to diversify its export capabilities by opening the Jask terminal outside the Strait of Hormuz chokepoint in the Gulf of Oman in 2021, but Kharg remains "a critical vulnerability" for Iran, JP Morgan said. 

"It is a cornerstone of Iran's economy and a major source of revenue for the Iranian Revolutionary Guard," JP Morgan added, referring to the well-resourced ideological branch of Iran’s army. 

A single chokepoint for Iran’s economy

The island’s strategic importance stems from concentration risk. Most of Iran’s export infrastructure is centralised there.

It handles roughly 90 percent of Iran's crude exports, according to a JP Morgan note released on Sunday. 

Storage tanks on the island can hold tens of millions of barrels of crude before loading onto tankers.

Because oil exports are a core source of Iran’s state revenue, Kharg is essentially the economic lifeline of the Iranian government.

Iran's oil exports would stall and output halve if the US and Israel were to seize its port on Kharg Island, triggering further attacks from ​Tehran on regional oil infrastructure, JP Morgan said.

In the crosshairs?

The US and Israel have so far treaded carefully around the island, but an Axios report over the weekend cited Trump administration officials saying capturing Kharg was on the table as the war in the Middle East persists.

Any move on the territory, which is about one-third the size of Manhattan, would have swift repercussions, experts say. 

Iranian strikes have all but halted maritime traffic in the Strait of Hormuz — through which a fifth of global crude oil and liquefied natural gas normally pass — and have also impacted oil infrastructure in other Gulf states.  

But Iranian energy assets have not been degraded so far and targeting the island would be "a very risky move", Farzin Nadimi, senior fellow at the Washington Institute for Near East Policy, told AFP. 

Iran is not only "experienced in using alternatives" in wartime, it could "cause a lot more damage on the Gulf oil and gas installations if they want to and they can do a lot more very quickly, and everybody knows that". 

"I don't think that seizing the island will go any further than US Congressional debates," he added — the prospect having been discussed in Washington since the hostage crisis that started in 1979 during the foundation of the republic. 

Why the island is still untouched

Analysts told The Guardian that attacking the terminal risks triggering a global oil shock.

“We may see the $120 a barrel price we saw on Monday heading to the $150 if Kharg were attacked,” said Chatham House thinktank’s Neil Quilliam was quoted as saying by The Guardian.

“It’s too vital for global energy markets”.

They also warned that a strike could provoke wider retaliation from Tehran, including attacks on oil facilities across the Gulf or shipping in the Strait of Hormuz, potentially escalating the conflict further.

Destroying Kharg or damaging its export facilities could trigger a lasting surge in oil prices, according to Lynette Nusbacher, a former British army intelligence officer, who said such a move “runs the risk of causing an economy-shaping increase in oil price that would not drop rapidly”.

Israel also refrained from targeting the island during last summer’s 12-day war, and analysts say its extensive and complex oil infrastructure could take years to rebuild if struck.

Nadimi said Washington could move to seize the island when hostilities end, but that it was "not a wise move" during combat when Kharg is "almost an entire island of oil facilities and pipelines and tank farms". 

"It is very difficult to wage a military operation on that particular island," he said. 

On Saturday, Israel launched its first attack of the war on oil facilities in Iran, but it claimed they were used "to operate military infrastructure".

The same day, Israeli opposition leader Yair Lapid argued for stronger steps, saying in an X post: "Israel needs to destroy all of Iran's oil fields and energy industry on Kharg Island; that's what will crush Iran's economy and bring down the regime."