In the volatile geopolitics of the Persian Gulf, the flashpoint on which every eye is currently trained is the tiny Kharg Island, through which some 90 per cent of Iran’s oil flows
A strike on this small, heavily fortified outpost would not simply be another episode in the long shadow war between United States and Israel, on the one hand and Iran on the other.
It would represent a decisive rupture in the global energy order, capable of transmitting shockwaves from Asian megacities to European industrial corridors within days.
“You can expect the price of crude which is already between USD 100-115 a barrel, to jump to USD 130-150, if Kharg island is attacked, gas and helium prices will go up. Fertilisers will be in short supply … in short all hell could break loose,” said Sandeep Johri, a commodities trader.
If Iran retaliates by not only blocking maritime flow through the Hormuz strait but by using Houthi proxies to attack shipping passing thtough the Red Sea, “the economic shock would be many more times,” Pinak R Chakravarty, former Secretary- Economic Relations, Ministry of External Affairs, told UNI.
Normally about 12 per cent of world’s global oil ships through the Red Sea, which the Houthis can blockade with missile hits. However, with the Hormuz route uncertain many more vessels have been redirected through the Red Sea and an attack on it could disastrous for world commerce.
“Any effective blockade of both chokepoints would be painful for the global econopmy,” said Chakravarty.
Kharg Island is not just Iran’s economic lifeline, its geographic location at the mouth of the Strait of Hormuz, the narrow artery through which 20 per cent of the world’s seaborne oil passes, makes it both uniquely vulnerable and uniquely important.
Any disruption here would end the distinction between a localised military strike and a global economic crisis. Iranian barrels would vanish overnight, and the risk premium attached to Gulf energy flows would spike dramatically. “Markets would begin pricing not just scarcity, but uncertainty, an even more destabilizing force,” said Johri.
Tehran has long signalled that Kharg is a red line and that any attack would invite retaliation not only in kind but in scope.
“Iran’s strategic doctrine emphasises asymmetry which includes mining shipping lanes, harassing tankers, and leveraging allied non-state actors across the region,” said Vice Admiral Shekhar Sinha, former Flag Officer Commanding Western Naval Fleet.
The Islamic Revolutionary Guard Corps would likely activate a network that stretches from Lebanon to Yemen, drawing in groups such as Hezbollah and the Houthis. The Gulf could quickly transform into a contested battlespace where commercial shipping becomes collateral damage.
“For energy-importing economies, the consequences would be severe. Not just India, South East Asia or China, which are deeply reliant on Gulf hydrocarbons, but the entire global economy would face immediate inflationary pressure and serious supply chain disruptions,” pointed out Chakravarty.
Widening current-account deficits, and renewed stress on domestic fuel pricing regimes are seen as the obvious fall-out.
In India’s case, the political economy of energy, already delicately balanced through tax calibrations and subsidy mechanisms, would come under more strain, forcing the Centre to raise prices once the state elections are done and dusted.
Europe, still navigating the aftershocks of its decoupling from Russian energy, would find its diversification strategy tested once again, while the rest of the world would pay a price through an inflationary spiral and far slower growth than normal.
“However, our belief is that the Americans who have not yet attacked but are signalling they are in readiness have a longer game to play. It’s about control of global oil supplies and re-establishment of the dollarization of oil,” said Vice Admiral Sinha.
Analysts point out that Venenzuela and Iran were pricing their oil in Yuan and selling to China. Reimposition of dollar pricing and controlling the flow could act as brakes on China’s rise to the top.
Beyond oil, the disruption could ripple through the arteries of global trade. Insurance premiums for vessels transiting the Gulf will soar, some shipping lines might suspend operations altogether and supply chains, already reconfigured in the wake of pandemic-era shocks and geopolitical fragmentation, would have to absorb yet another blow.
The cost of moving goods, from fertilisers to semiconductors, would rise, feeding into a broader cycle of global inflation and even food scarcities in many parts of the world.
However, the most enduring consequence of this war may actually lie in accelerating the global push toward energy diversification, deepening investments in renewables, a push towards nuclear power, a power infrastructure no combatant wants to bomb, and a reshaping of the supply chains for critical minerals.
“The long-term trajectory away from concentrated hydrocarbon chokepoints would gain urgency, even as the short-term costs mount,” pointed out Johri.
Strategically, a strike on Kharg island would simply harden the emerging fault lines of the international system and push back chances of peace. Washington and Tehran would be locked into a prolonged confrontation, with secondary theatres stretching across Iraq, Syria, and the Red Sea.
Jayanta Roy Chowdhury
