Beyond the strait

Donald Trump's decision to launch an attack on Kharg Island could see oil pass the 2008 record price of $147.50 a barrel as damage and field closures risk compounding the greatest energy supply shock in history

- By Jillian Ambrose

ABOUT 30KM OFF THE COAST OF IRAN lies the source of the petrostate's economic lifeblood and a target of US military aggression: a 20 sq km coral island through which nine in every 10 barrels of Iranian crude passes each day. The US president’s decision to launch a weekend attack on Kharg Island, the home of Iran’s processing hub and the heart of its economy, is an unsurprising counterstrike to the Iranian regime’s ongoing chokehold on the oil market’s trade artery.

But uncertainty over future oil production by one of the world’s largest producers is also likely to cause further market volatility after weeks of historic price increases.

Donald Trump ordered the US military attack on Iran’s most strategic economic asset last Saturday, exactly two weeks after the US-Israeli strikes that began the war and led to the blocking of the strait of Hormuz.

The bombardment took aim at military assets on the island, and has so far spared oil facilities. But Trump has warned that he may reconsider if Iran refuses to open the strait.

Any damage to Kharg Island’s oil infrastructure could force Iran to cut production at its oilfields, potentially erasing another 1m barrels from global markets already unsettled by cuts from neighbouring Gulf nations unable to ship their crude to international buyers.

The world’s largest offshore oilfield stretches more than 60km from Saudi Arabia’s eastern province into the depths of the Gulf. For almost 70 years the Safaniya field has produced millions of barrels of Arabian heavy crude to be sold by the biggest oil-producing country. Last week, the field was shut.