Key Takeaways:
Trump threatened to seize Iran's Kharg Island oil hub and ordered a third night of strikes, escalating a conflict that has already pushed crude prices higher and forced the European Central Bank to raise interest rates.
"The threat to take Kharg Island represents a dramatic escalation in US objectives — moving from degrading Iranian military capability to seizing sovereign territory," said Elena Fischer, geopolitical risk analyst at Edgen.
The tiny coral outcrop in the Persian Gulf handles roughly 90% of Iran's crude exports, making it the country's economic lifeline. Iran's Revolutionary Guards responded by declaring the Strait of Hormuz — through which about 21% of global oil trade passes — "closed until further notice," a claim the US military disputed. The European Central Bank raised its benchmark rate by a quarter point to 2.25% Thursday, the first hike since 2023, citing energy-driven inflation from the war.
The escalation risks a prolonged supply shock in oil markets at a time when global inventories are already tight. Shipping through the Strait of Hormuz has collapsed to about 15% of pre-war levels, according to JPMorgan, and the US has disabled nine vessels attempting to transport Iranian oil this week alone.
A widening conflict
Trump wrote on Truth Social that the US would hit Iran "VERY HARD TONIGHT" and that "at some point in the not too distant future, we will be taking Kharg Island, and other oil infrastructure points, and assume total control of their Oil and Gas Markets." He compared the move to US operations in Venezuela, which he said was "working out brilliantly."
The US military said it struck Iranian surveillance, communication and air defense sites across Iran in the second night of attacks. Explosions were reported near Tehran and in cities close to the Strait of Hormuz, including Bandar Abbas and Sirik. Iran's Revolutionary Guards said they retaliated by targeting US bases in Kuwait, Bahrain and Jordan, with Jordan reporting it intercepted 20 missiles.
An 11-year-old girl in Bahrain sustained minor wounds from falling debris, officials said.
Diplomacy under pressure
A Qatari delegation departed Tehran after overnight negotiations with Iranian officials that lasted into the early hours of Thursday, a diplomatic source told CNN. The talks were conducted in coordination with the US, even as American warplanes were striking Iranian targets.
Pakistan, a key regional mediator, called on all parties to "end hostilities to widen the space for dialogue and diplomacy." India summoned Washington's Charge d'Affaires to protest after three Indian seafarers were killed in a US strike on an Iran-linked oil tanker in the Gulf of Oman.
Iran's Foreign Minister Abbas Araghchi told EU foreign affairs chief Kaja Kallas that the recent US strikes had rendered the temporary ceasefire "meaningless," according to Iran's Islamic Republic News Agency.
Market implications
The last time a major power threatened to seize another nation's oil infrastructure was during the 1990 Gulf War, when Iraq's invasion of Kuwait removed about 4 million barrels per day from global markets. The current conflict has already choked off a significant portion of Iran's 1.5 million barrels per day of exports, with the US blockade redirecting 135 vessels and disabling nine since April.
Iran's supreme leader advisor Mohammad Mokhber warned that Tehran would "respond more severely and more heavily" to any future US attacks, adding that the fate of the war depends on Washington's actions. The Strait of Hormuz closure, even if only partially enforced, threatens the flow of about 17 million barrels per day of oil and liquefied natural gas that transits the waterway daily.
The ECB's rate hike Thursday underscores how the conflict is rippling beyond the Middle East. Euro area inflation stood at 3.2% last month, up from 3% in April, as energy prices rose. The International Monetary Fund sees euro area growth at 1.1% this year, a 0.2 percentage point downgrade from its January forecast.
This article is for informational purposes only and does not constitute investment advice.
