Iran’s 'oil lifeline’ has been left untouched in the conflict. What happens if it's seized?

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A general view of the Port of Kharg Island Oil Terminal, 25 km from the Iranian coast in the Persian Gulf and 483 km northwest of the Strait of Hormuz, in Iran on March 12, 2017.

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The prospect of a U.S. move to seize Kharg Island, a strategically vital hub often referred to as Iran’s “oil lifeline,” is considered extremely high risk, both from a geopolitical and economic standpoint.

The five-mile-long coral island, which is located about 15 miles off the coast of mainland Iran in the waters of the northern Persian Gulf, has been left untouched through nearly two weeks of U.S. and Israeli-led strikes against Iran.

The Trump administration has discussed seizing the island, according to an 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 fall dramatically once Operation Epic Fury comes to an end, while White House Press Secretary Karoline Leavitt has said the president “wisely” keeps all options on the table.

Kharg Island has been thrust into the global spotlight because it is regarded as one of Iran’s most sensitive economic targets. The terminal accounts for around 90% of the country’s crude exports and has a loading capacity of roughly 7 million barrels per day.

Analysts say that any attempt to attack or seize it would require a ground troop operation, which the U.S. appears reluctant to undertake. An attack would also likely prompt a sustained increase to already soaring oil prices.

U.S. Defense Secretary Pete Hegseth has previously refused to rule out deploying American ground forces in Iran but said the U.S. won’t get bogged down in the country.

Francis Galgano, an associate professor and military geography and environmental security specialist at Villanova University in Pennsylvania, said the location of Kharg Island is important because it sits in deep water that enables the approach of oil supertankers.

“I will put on my war hat … if the objective is to win the war (quickly), you destroy or capture Kharg immediately,” Galgano told CNBC by email, adding that any such attempt would create maximum leverage over Tehran.

Nonetheless, taking the small island would be no mean feat, Galgano said. “It would involve moving a considerable number of ground combat troops into the region … I estimate about 5,000 to take and hold the island.”

He added: “All of this of course affects global oil markets, but they are already being affected.”

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Could the U.S. seize Kharg Island, Iran’s strategic oil hub?

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Oil prices have been extremely volatile since the U.S. and Israel launched airstrikes on Iran on Feb. 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 key maritime corridor that connects the Persian Gulf and the Gulf of Oman. Roughly 20% of global oil and gas typically passes through it.

International benchmark Brent crude futures with May delivery traded off by 1% at $99.45 per barrel on Friday, while U.S. West Texas Intermediate futures with April delivery were last seen 2% lower at $93.81.

If Kharg Island were disabled, analysts at JPMorgan said the loss of Iran’s storage buffer and the scarcity of viable export alternatives would “rapidly trigger upstream shut-ins across major southwest fields.”

“With production near 3.3 mbd and exports around 1.5 mbd, 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 said in a note published Sunday.

Security control

Richard Goldberg, senior advisor at the Foundation for Defense of Democracies, a nonprofit research institute considered hawkish on Iran, said he understood the hesitation to do anything that could knock out Iranian oil production at a time when markets are jittery and the potential for regime change is still in play.

“That may change quickly as we take back security control of the Strait of Hormuz and we get a clearer picture if the regime is able to hang on to power a while longer,” Goldberg told CNBC by email.

“At that point we absolutely need to consider disabling the export terminal or otherwise cutting off the regime’s financial lifeline indefinitely,” he added.

Satellite view of Kharg Island, located in the Persian Gulf off the coast of Iran.

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U.S. President Donald Trump on Friday suggested that an end to the Iran war was not imminent, reportedly saying that America “has ammunition and plenty of time” to keep fighting.

His comments come shortly after Iran’s new supreme leader, Mojtaba Khamenei, also struck a defiant tone as he insisted the Strait of Hormuz must remain closed as a “tool to pressure the enemy.”

Iran’s enormous scale and mountainous topography mean the U.S. mobilizing any conventional ground forces in the region would require hundreds of thousands of troops, according to Alex Plitsas, a senior non-resident fellow at the Atlantic Council think tank.

“Any use of ground forces would likely be limited to special operations forces for specific missions,” Plitsas said Wednesday in a note, without referring specifically to Iran’s Kharg Island.

Read more U.S.-Iran war news

• U.S. ‘misadventure’ in Iran has no clear exit strategy, Russia’s UK ambassador says
• Many Dubai expats fled as the war in the Middle East escalated. Those that stayed say life is ‘functioning but tense’
• Pete Hegseth on Strait of Hormuz: ‘Don’t need to worry about it’
• Four crew killed in U.S. refueling plane that crashed in Iraq, Pentagon says
• Strait of Hormuz must remain closed as ‘tool to pressure enemy,’ Iran’s new supreme leader says
• U.S. forces sink 16 Iranian minelayers as reports say Tehran is mining the Strait of Hormuz
• Iran sends millions of oil barrels to China through Strait of Hormuz even as war chokes the waterway
• Former Israeli Ambassador: Iran war won’t end in a few days
• Prediction markets face questions amid Iran war, nuclear detonation wagers
• Russia told Trump it has not shared intelligence with Iran during war, Witkoff says
• Oil retreats even after Energy Secretary wrongly claims Navy escorted tanker through Strait of Hormuz
• Strait of Hormuz will partially reopen in 2-3 weeks: David Roche
• The Iran war threatens LPG supply. India’s restaurants are in trouble
• Iran defends strikes on Gulf neighbors — but they say trust is broken
• Why China can withstand oil’s surge past $100 more easily than other countries
• Trump says oil price surge is a ‘small price to pay’ for defeating Iran
• PRO: Oil price surge could boost these Chinese stocks, Goldman says

— CNBC’s Michael Bloom contributed to this report.

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