Attention is now shifting to Kharg Island, following an Axios report that the Trump administration has discussed seizing the strategic export terminal.
That’s what J.P. Morgan analysts, including Natasha Kaneva, the company’s head of global commodities strategy, said in an oil flash note sent to Rigzone on Monday by Kaneva, stating that the terminal “handles roughly 90 percent of Iran’s crude exports”.
“The island has evolved into the backbone of Iran’s export system, which handles the vast majority of the country’s crude shipments,” the analysts stated in the note.
“It is a cornerstone of Iran’s economy and a major source of revenue for the Iranian Revolutionary Guard,” they added.
“If Kharg Island were disabled, the loss of its storage buffer and the scarcity of viable export alternatives would rapidly trigger upstream shut-ins across major southwest fields,” the analysts warned.
“With production near 3.3 million barrels per day and exports around 1.5 million barrels per day, as much as half of national output could be at risk if the hub remains offline, and the previously assumed 20-day buffer would vanish from day one,” they continued.
In the note, the J.P. Morgan analysts highlighted that Kharg Island was “largely untouched in recent conflicts”. Looking at why this has been the case, the analysts said the island “has often been viewed as a critical vulnerability, yet it has rarely been directly targeted in modern conflicts, largely due to the high geopolitical and economic risks of such an attack”.
“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,” they said.
“During the 1979 Iran hostage crisis, advisers suggested seizing Kharg Island as leverage against Tehran. President Jimmy Carter imposed sanctions but refrained from ordering strikes on the island,” the analysts noted.
“His successor, Ronald Reagan, during the 1980s Iran-Iraq Tanker War, prioritized protecting shipping and targeting Iranian vessels and missile batteries, leaving Kharg untouched,” they added.
“Although Iraqi forces struck some terminals and tankers during the eight-year war, Kharg remained largely operational and damage was typically repaired quickly, demonstrating that disabling it would require sustained, large-scale attacks,” the J.P. Morgan analysts pointed out.
In a statement sent to Rigzone on March 4, Enverus subsidiary Enverus Intelligence Research (EIR) warned that, if Kharg Island were offline “for an extended period”, this could add an additional $10 to $15 per barrel to EIR’s current 2026 Brent crude price forecast of $63 per barrel.
In J.P. Morgan’s oil flash note, the company’s analysts highlighted that, in the days leading up to the U.S.-Israeli attack, Iran ramped up exports from Kharg Island “to near record levels – loading over three million barrels per day between February 15-20, nearly triple the normal export pace of around 1.3-1.6 million barrels per day – suggesting Iran was accelerating shipments ahead of the anticipated escalation”.
The analysts noted that storage capacity on Kharg Island is estimated at roughly 30 million barrels, and stated that, according to Kpler, approximately 18 million barrels of crude is currently stored on the island, “equivalent to roughly 10-12 days of exports under normal conditions”.
Rigzone has contacted the White House and the Iranian Ministry of Foreign Affairs for comment on J.P. Morgan’s oil flash note and EIR’s statement. At the time of writing, neither has responded to Rigzone with a comment.
In a market comment sent to Rigzone on Monday morning, Aaron Hill, Chief Market Analyst at FP Markets, noted that, as of early trading this morning, both WTI and Brent were “up a whopping 14 percent and 16 percent … respectively”.
“These are just incredible moves, trading near highs seen in 2022 when Russia invaded Ukraine,” Hill highlighted in the comment, which pointed out that WTI and Brent “rallied an eye-popping 35 percent and 27 percent last week, respectively”.
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