Oil up as US targets Iran’s Kharg Island

Brent futures remain well above $100/bbl after US forces hit Iranian military bases on the strategic Kharg Island over the weekend, escalating concerns over oil supplies.

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US forces have struck naval mine storage facilities, missile storage bunkers, and multiple other military sites on Kharg Island "while preserving the oil infrastructure," the US Central Command (CENTCOM) said on social media platform X.

Oil prices rose after US President Donald Trump warned that the CENTCOM could target Tehran’s key oil infrastructure on the island if disruptions to commercial shipping through the Strait of Hormuz worsen.

Kharg Island is located about 26 km off Iran’s coast, about 483 km northwest of the Strait of Hormuz. With a storage capacity of about 30 million bbls, the island serves as a vital oil export terminal for Iran, according to Reuters.

“I have chosen NOT to wipe out the Oil Infrastructure on the Island,” Trump said, adding, “Should Iran, or anyone else, do anything to interfere with the Free and Safe Passage of Ships through the Strait of Hormuz, I will immediately reconsider this decision.”

Majority of the crude oil shipped from the island goes to China – one of the world’s top oil consumers, Reuters reported.

Market analysts have warned that destroying the terminal could drive global oil prices sharply higher. “US strikes on Iran’s Kharg Island raise further supply risks,” remarked two analysts from ING Bank.

“US strikes over the weekend on Kharg Island raised supply concerns, as most of Iran's oil exports pass through it,” the analysts said.

Iran is the third-largest OPEC producer, with a total crude output capacity of about 3.3 million ​b/d.

“Targeting Iranian oil infrastructure only increases the risk that Iran will further target regional energy infrastructure,” ING Bank’s analysts added.

By Aparupa Mazumder

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