Kharg Island, a scrubby stretch of land in the northern Gulf, handles almost all of Iran's crude exports and any attempt to seize it would mark a major escalation in the conflict, analysts say.
The US and Israel have so far treaded carefully around the island, but an Axios report over the weekend cited Trump administration officials saying capturing Kharg was on the table as the war in the Middle East persists.
The island, located around 30 kilometers (19 miles) off the Iranian mainland, handles roughly 90 percent of Iran's crude exports, according to a JP Morgan note released Sunday.
Any move on the territory, which is about one-third the size of Manhattan, would have swift repercussions, experts say.
"A direct strike would immediately halt the bulk of Iran's crude exports, likely triggering severe retaliation in the Strait of Hormuz or against regional energy infrastructure," JP Morgan said.
Iranian strikes have all but halted maritime traffic in the Strait of Hormuz -- through which a fifth of global crude oil and liquefied natural gas normally pass -- and have also impacted oil infrastructure in other Gulf states.
But Iranian energy assets have not been degraded so far and targeting the island would be "a very risky move", Farzin Nadimi, senior fellow at the Washington Institute for Near East Policy, told AFP.
Iran is not only "experienced in using alternatives" in wartime, it could "cause a lot more damage on the Gulf oil and gas installations if they want to and they can do a lot more very quickly, and everybody knows that".
"I don't think that seizing the island will go any further than US Congressional debates," he added -- the prospect having been discussed in Washington since the hostage crisis that started in 1979 during the foundation of the Islamic republic.
Kharg underwent key developments during Iran's oil expansion in the 1960s and 1970s, with much of the country's coast too shallow for supertankers.
Iran has looked to diversify its export capabilities by opening the Jask terminal outside the Strait of Hormuz chokepoint in the Gulf of Oman in 2021, but Kharg remains "a critical vulnerability" for Iran, JP Morgan said.
"It is a cornerstone of Iran's economy and a major source of revenue for the Iranian Revolutionary Guard," JP Morgan added, referring to the well-resourced ideological branch of Iran's army.
- 'Very difficult' -
The war has sent oil prices soaring, although US President Donald Trump's suggestion on Monday that the conflict could end soon has calmed the market.
Over the weekend, the director of the White House National Energy Dominance Council Jarrod Agen told Fox News that "what we want to do is get such massive oil reserves in Iran out of the hands of terrorists".
Also in recent days, the Washington Post reported heightened speculation that US ground forces could be being prepared to deploy, citing analysts saying Kharg Island would be an early target.
Nadimi said Washington could move to seize the island when hostilities end, but that it was "not a wise move" during combat when Kharg is "almost an entire island of oil facilities and pipelines and tank farms".
"It is very difficult to wage a military operation on that particular island," he said.
But other oil infrastructure could be in the crosshairs, with Trump repeatedly referencing his operation to topple Venezuelan president Nicolas Maduro and gain access to the country's oil reserves in January as a blueprint.
Iran -- the fourth-biggest crude producer within the Organization of the Petroleum Exporting Countries (OPEC) -- vowed not one liter of oil would be exported from the Gulf while the war continues.
Any attack on its infrastructure would get an "eye for an eye" response, it said.
On Saturday, Israel launched its first attack of the war on oil facilities in Iran, but it said they were used "to operate military infrastructure".
The same day, Israeli opposition leader Yair Lapid argued for stronger steps, saying in an X post: "Israel needs to destroy all of Iran's oil fields and energy industry on Kharg Island; that's what will crush Iran's economy and bring down the regime."
