A large-scale U.S. attack on the island responsible for handling the majority of Iran's crude oil exports has intensified market fears of broader supply disruptions in the region. This development further destabilizes oil and gas markets already unsettled by two weeks of conflict in the Middle East. U.S. President Donald Trump stated in a post on his Truth Social account on Friday that the U.S. had bombed military targets on Kharg Island in the Persian Gulf, while deliberately avoiding oil infrastructure. He warned Iran's leaders that he would immediately reconsider this decision if they interfere with shipping through the Strait of Hormuz. Iran responded by stating that any strikes targeting its oil and energy infrastructure would lead to retaliatory attacks on U.S.-related energy facilities in the region.
Although neither side has reported evidence of damage to energy infrastructure, the attack has heightened oil-related risks in a conflict that has already impacted production, nearly closed the Strait of Hormuz, and driven crude prices up by more than 40%. The International Energy Agency (IEA) stated this week that the war has caused one of the largest supply disruptions in the history of the oil market.
Iran is heavily reliant on Kharg Island, which handles approximately nine out of every ten barrels of its crude exports, with the vast majority ultimately destined for China. "This is Trump attempting to force de-escalation through escalation—a 'fight to de-escalate' strategy," said Rachel Ziemba, a senior fellow at the Center for a New American Security. "The biggest risk for oil markets and the war is whether Iran retaliates."
In a report following the attack, analysts including Natasha Kaneva at JPMorgan Chase & Co. wrote that the impact on oil supplies could be quite limited if no further strikes occur and the island's loading terminals, storage tanks, and pipelines remain intact. This would maintain the country's export capacity at approximately 1.5 to 1.7 million barrels per day. However, the attack raises the stakes in a conflict that has so far largely avoided the region's oil infrastructure.
JPMorgan analysts noted that key and highly vulnerable energy nodes include Saudi Arabia's Ras Tanura export terminal and Abqaiq processing center, as well as the Fujairah oil hub in the United Arab Emirates.
During the Iran conflict, oil prices surged by more than 40%. In an earlier report on March 8, JPMorgan stated that if Kharg Island were forced offline, it would quickly trigger upstream production cuts, risking the loss of up to half of Iran's oil output. The bank indicated that while Iran was previously expected to be one of the last Persian Gulf producers to halt production, it might now cease operations sooner than Kuwait and the UAE.
"I suspect ships will hesitate to load cargo when the island is under such a direct threat of military attack from the U.S.," said Bob McNally, President of the Washington consulting firm Rapidan Energy Group. "This is especially true if Iran continues to interfere with traffic in the Strait of Hormuz."
Ship-tracking data indicates that traffic through the Strait of Hormuz has been at a virtual standstill for two weeks, with no confirmed transits recorded in either direction on Friday.
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