Follow live updates: US-Iran war
The US on Friday struck Iran's critical Kharg Island, a move that, if escalated, may result in more uncertainty for the energy sector and global economy.
US President Donald Trump initially said the attacks were aimed at military facilities in the area. However, he has threatened to target the island's oil infrastructure if Iran continues to "interfere" with the passage of vessels in the Iran-controlled Strait of Hormuz.
On Saturday, the Iranian military said its forces would launch strikes on regional oil companies co-operating with the US if its energy infrastructure is attacked.
Much is at stake in the situation shaping up at Kharg Island.
How important is Kharg to Iran?
Kharg Island, also known as the Forbidden Island, is a small coral island about 30km off Iran's south-western coast, where petroleum from the country's oilfields arrives through undersea pipelines to be loaded on to tankers.
It is also a tourism spot: Kharg is one of the few islands in the Arabian peninsula with freshwater resources and is home to wildlife including gazelles, hawksbill sea turtles, green sea turtles, goats, large white-headed seagulls, ospreys, house crow and migratory birds, according to Iranian Tours.
The island handles about 90 per cent of Iran’s oil exports, with estimates pegging its loading capacity at 7 million barrels per day and storage capacity at 30 million barrels.
Iran has the third-biggest proven crude reserves at about 208.6 billion barrels, which account for nearly 12 per cent globally, data from Worldometers shows.
Most shipments from Kharg Island go to Asian customers, and a significant majority, or about 80 per cent, goes to China.
"If Kharg goes offline, Iran’s oil exports effectively stop," said Giacomo Prandelli, founder of The Merchant's News, which focuses on global commodities.
How would it affect oil prices?
Crude prices have already skyrocketed after the onset of the war. It swung sharply through the week, spiking to nearly $120 on Monday, retreating on hopes of a swift end to the war, then surging past $100 again despite a record release of strategic reserves.
Any disruption to operations at Kharg Island is expected to "quickly affect energy prices and have unpredictable consequences for the global economy", said Yong Liang, deputy head of treasury at Industrial and Commercial Bank of China.
At the same time, a deeper geopolitical shift is emerging, especially as Tehran is increasingly encouraging oil transactions denominated in Chinese yuan, signalling a gradual pivot towards renminbi-based energy trade with China, said Mazhar Pasha, executive director at India-based Syndicate Capital.
"Under the pressure of sanctions and conflict, what was once a theoretical discussion about de-dollarised commodity markets is beginning to take practical shape," he said.
"The episode underscores a broader reality of war economics. Iran’s leverage has long rested on two foundations: energy resources and geography. While the US may degrade military infrastructure around export hubs, Iran retains the ability to influence the global economy through control of strategic waterways and the flow of Gulf energy."
Would the attacks lead to Iran's surrender?
That remains unclear, as Iran has vowed to keep fighting, giving more uncertainty as to the duration of the war.
But, there's a "chance", as "it is possible that the IRGC [Islamic Revolutionary Guard Corps] is so distraught as the leadership is under ground", said Peter Nowicki, head of the repo desk at California-based Wedbush Securities.
"Some say this war will last a long time but the US does not want this outcome … Mr Trump wants a surrender now … my chips are that he gets his way," he added.
Tehran may not simply back down and give up both Kharg Island and the Strait of Hormuz. The latter is not just a shipping lane; it is one of its most powerful leverage points in any confrontation, said Zohaib Ahmed, founder of Pakistan-based consultancy Synorix.
"That is why expectations of surrender or unrestricted maritime passage are unrealistic. From Iran’s perspective, this conflict is framed as a war of survival," he said.
"The immediate consequence of strikes … is therefore more likely to be volatility in global energy markets and further regional escalation, rather than the rapid collapse of Iranian resistance that American messaging suggests."
