‘$78 billion revenue machine’: Why Kharg Island is central to Iran’s war calculus

Kharg Island, a small island in the Persian Gulf that handles most of Iran’s crude exports, has emerged as a focal point in the escalating war after a US strike targeted military facilities there on Friday. 

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In a post on Truth Social, US President Donald Trump said the operation targeted military infrastructure while deliberately sparing the energy facilities. “Moments ago, at my direction, the United States Central Command executed one of the most powerful bombing raids in the History of the Middle East, and totally obliterated every MILITARY target in Iran’s crown jewel, Kharg Island. But, for reasons of decency, I have chosen NOT to wipe out the Oil Infrastructure on the Island.”

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The restraint, however, could change if shipping in the region is threatened, Trump warned. “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.”

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Kharg Island: Iran’s oil export hub

Located roughly 33 kilometers (21 miles) off Iran’s coast in the Persian Gulf, Kharg Island functions as the primary terminal for the country’s crude shipments to global markets. 

Deep-water ports on the island allow large oil tankers to dock and load crude – a capability that much of Iran’s coastline cannot easily accommodate. Before the current conflict, the facility handled about 90% of Iran’s crude oil exports.

The island’s importance is reflected in the scale of revenue it generates.

“Kharg Island [generates] $78 billion a year in energy revenue, with irreplaceable deep water berths no other Iranian port can replicate,” Miad Maleki, a former U.S. Treasury sanctions official and senior advisor at the Washington-based Foundation for Defense of Democracies, told TIME.

According to Maleki, a significant share of Iran’s oil export income supports the armed forces, which often take possession of oil barrels and sell much of the crude independently, largely to China.

That structure makes the island not only the backbone of Iran’s economy but also the military’s main revenue stream.

Iran has exported 13.7 million barrels of oil since the war began, with shipments continuing to reach buyers despite the conflict.

Kharg Island: Strategic leverage in the war

US Senator Lindsey Graham, a close ally of Trump, in a post on Saturday, said Trump’s decision to take the war to Kharg Island – “the crown jewel of Iran’s oil and gas economy – was necessary, bold and in my view, highly effective.” 

He added that the strike will help shorten the war. “Seldom in warfare does an enemy provide you a single target like Kharg Island that could dramatically alter the outcome of the conflict. If Iran loses control or the ability to operate its oil infrastructure from Kharg Island, its economy is annihilated. He who controls Kharg Island, controls the destiny of this war,” he wrote on X. 

Energy analysts say the island’s central role in Iran’s oil trade gives it strategic weight far beyond its size.

Petras Katinas, an energy researcher at the Royal United Services Institute, said Kharg Island is essential to financing Iran’s government and military.

“It doesn’t matter which regime is in power – new or old,” Katinas was quoted as saying by The Associated Press. Control of the island would provide Washington with leverage in negotiations because it represents “the main node” of Iran’s economy.

What happens if Kharg’s oil facility is attacked?

However, the potential damage to the Kharg Island is likely to go beyond Iran’s domestic economy.

“If Kharg were attacked and its energy infrastructure destroyed, that would take 90% of Iran’s crude exports offline,” Amir Handjani, Resident Fellow at the Quincy Institute, told TIME. “It will also invite massive Iranian retaliation on the energy infrastructure of the Arab States of the Persian Gulf, beyond what we have seen so far.”

Because Kharg Island connects Iran’s oil fields to international markets, disruptions there could ripple across global shipping routes and oil markets.

The island’s proximity to the Strait of Hormuz – the narrow channel through which roughly a quarter of global seaborne oil passes – further magnifies its importance in the conflict.