Kudlow urges Marines to seize Kharg Island, oil surges 7%

Larry Kudlow, the former National Economic Council director, publicly called for US Marines to seize Iran's Kharg Island on Wednesday, escalating the conflict just as Brent crude surged 7 percent to $78 a barrel after Washington revoked a sanctions waiver.

"Kharg Island is the jugular of the Iranian economy — it handles over 90 percent of their oil exports," Kudlow said in a statement. "It's time for the Marines to take it."

The call came hours after US Central Command struck more than 80 targets across Iran's coastal areas, including air defense systems, anti-ship missile positions and IRGC vessels, in retaliation for Iranian attacks on three commercial ships in the Strait of Hormuz. TankerTrackers.com reported Iran is currently loading 6 million barrels of crude at Kharg Island, while the NGO United Against Nuclear Iran has tracked 43 tankers departing with roughly $4.5 billion in cargo since the June ceasefire.

Any credible military threat against Kharg Island — which handles approximately 90 percent of Iran's crude exports — could remove millions of barrels per day from global supply, pushing oil prices sharply higher and deepening the selloff in equity markets that has already erased billions in value across Asia and Europe.

Oil Markets React as Supply Risk Intensifies

Brent crude futures climbed as much as 7 percent following Trump's declaration that the ceasefire with Iran was "effectively over," before settling near $78 a barrel. West Texas Intermediate rose a similar magnitude. The spike reversed the sharp decline seen during the second quarter, when the interim peace agreement reached in June had reopened the Strait of Hormuz and fueled expectations of improving global supplies.

The broader market rout deepened. The S&P 500 fell 0.45 percent on Tuesday, with futures pointing to another 0.82 percent decline at Wednesday's open. Europe's Stoxx 600 dropped 1.69 percent, while South Korea's KOSPI tumbled 5.35 percent and Japan's Nikkei 225 lost 2.11 percent. Gold, typically a safe haven, fell 2.24 percent to $4,066.40 an ounce as a liquidity squeeze forced investors to sell across asset classes.

Strait of Hormuz Remains the Flashpoint

The Joint Maritime Information Center raised the threat level for the Strait of Hormuz from "substantial" to "severe" after confirming three attacks on commercial vessels — two crude tankers and one Qatari LNG carrier — in a single day. The IRGC has asserted total authority over the waterway, telling the International Maritime Organization that Iran is not bound by UNCLOS and that all transits require its approval.

The last time the US faced a comparable disruption in the Strait was during the Tanker War of 1987-88, when the US Navy reflagged Kuwaiti tankers and escorted them through the Gulf. Today, the stakes are higher: the Strait carries about a fifth of the world's seaborne crude oil and a quarter of its LNG exports. Any sustained disruption could push Brent above $100 a barrel, according to analysts at UBS Group.

If the US follows through on Kudlow's proposal, Iran would lose its primary revenue source, potentially triggering a regime-threatening economic crisis. If Washington limits its response to the current round of airstrikes, the risk of a prolonged tit-for-tat escalation remains — one that keeps the Strait largely impassable and oil prices elevated for the foreseeable future.

This article is for informational purposes only and does not constitute investment advice.