The Toll at the Edge of the World: Iran's Bid to Tax the Strait of Hormuz and the Global Order at Stake

Six weeks after the United States and Israel launched airstrikes against Iran, the 21-mile-wide waterway that carries a quarter of the world's seaborne oil remains largely shut. Iran's price for reopening it: a toll booth.

Senior Iranian officials have demanded the right to levy approximately $2 million per vessel transiting the Strait of Hormuz, a fee the Islamic Revolutionary Guard Corps has already begun collecting in Chinese yuan and cryptocurrency from select ships allowed to pass [1][2]. The International Maritime Organization, the UN's shipping agency, responded on April 9 by declaring that any such toll would "set a dangerous precedent" and that "there is no international agreement where tolls can be introduced for transiting international straits" [3][4].

President Donald Trump, who initially floated the idea of a U.S.-Iran "joint venture" to collect tolls, reversed course and warned Tehran: "There are reports that Iran is charging fees to tankers going through the Hormuz Strait. They better not be and, if they are, they better stop now" [5][6]. He threatened "bigger and stronger" attacks if Iran does not comply with ceasefire terms requiring the strait be opened "without limitation, including tolls" [7].

The crisis has forced a reckoning with a question the post-World War II maritime order assumed was settled: can a nation charge rent on the open sea?

What Flows Through Hormuz — and What Stopped

Before the conflict began on February 28, 2026, an average of 20 million barrels per day of crude oil and petroleum products transited the Strait of Hormuz — roughly 25% of all global seaborne oil trade and about one-fifth of total world oil consumption [8]. An additional 112 billion cubic meters of liquefied natural gas passed through annually, accounting for nearly 20% of global LNG trade [9]. More than 100 commercial vessels crossed the strait daily [10].

Those flows have collapsed. Since March 1, Lloyd's List Intelligence tracked only 221 transits through the strait, the majority eastbound — ships leaving, not entering, the Persian Gulf [10]. Major carriers including Maersk, CMA CGM, Hapag-Lloyd, MSC Group, and COSCO have suspended Hormuz transits entirely [10]. Gulf producers, led by Saudi Arabia, have been forced to shut in approximately 12 million barrels per day of crude production because export routes are blocked [1].

The impact on oil prices has been severe. WTI crude reached $114.01 per barrel in early April 2026, up 86.7% year-over-year [11].

Source: FRED / EIA

Data as of Apr 6, 2026CSV

Who Gets Hurt: Asia's Exposure

The economic pain is not distributed evenly. In 2024, 84% of crude oil and 83% of LNG moving through Hormuz was bound for Asian markets [8]. China alone received 37.7% of all Hormuz crude flows, followed by India at 14.7%, South Korea at 12.0%, and Japan at 10.9% [12].

But raw volume understates the vulnerability of smaller economies. Japan depends on the Middle East for roughly 90% of its crude oil imports, almost all of which transits Hormuz [13]. South Korea sources about 70% of its crude from the Middle East, routing more than 95% of that through the strait [13]. A risk assessment by Zero Carbon Analytics rated Japan's supply disruption risk at 6.4 out of 10, with South Korea at 5.3, India at 4.9, and China at 4.4 [13].

Source: EIA / Zero Carbon Analytics

Data as of Apr 1, 2026CSV

Source: EIA / Visual Capitalist

Data as of Dec 1, 2025CSV

Strategic petroleum reserves provide a buffer, but an uneven one. Japan and South Korea hold 150 and 200 days of oil reserves respectively [13]. China's strategic petroleum reserve can sustain approximately four months of imports [13]. LNG reserves are far thinner: South Korea holds about 3.5 million tons and Japan about 4.4 million tons — enough for roughly two to four weeks of normal demand [13]. Asian governments have already called for belt-tightening measures as the strait remains closed [14].

The Toll Proposal: Structure, Sponsors, and Revenue

Iran's toll demand is embedded in a 10-point proposal for ending the war, which also includes Oman as a co-administrator of the tolling regime [1]. The proposed rate of approximately $2 million per large tanker works out to roughly $1 per barrel for a vessel carrying 2 million barrels [1]. A separate Financial Times report indicated the IRGC sought to collect $1 per barrel transiting the waterway, payable in bitcoin [15].

The legislative machinery is already in motion. Iran's National Security and Foreign Policy Committee approved the "Strait of Hormuz Management Plan" on March 31, advancing the bill to a full parliamentary vote, with Guardian Council review and a presidential signature still required [2]. In practice, the IRGC Navy has not waited for formal authorization — it has been charging vessels approximately $2 million each to transit a northern corridor around Larak Island since mid-March [2].

Iran has framed the tolls as reconstruction funding. Supreme Leader Mojtaba Khamenei — who assumed the position after his father Ali Khamenei was killed in the initial U.S.-Israeli strikes — declared Iran would bring management of the strait "into a new phase" and demanded compensation for war damages [15][16]. The domestic political logic is plain: Iran's economy was in distress before the war, and the physical destruction has been immense.

At pre-crisis transit volumes of roughly 100 ships per day, a $2 million toll would theoretically generate $73 billion annually. In the current environment, with traffic reduced to a trickle and only ships from five approved nations (China, Russia, India, Iraq, and Pakistan) allowed to pass, actual collections are far lower [10]. The gap between theoretical revenue and enforceable revenue is one of the proposal's fundamental weaknesses.

What International Law Actually Says

The legal framework governing transit through international straits rests on the United Nations Convention on the Law of the Sea (UNCLOS), specifically Part III. Article 38 establishes the right of "transit passage" — continuous and expeditious movement through straits connecting parts of the high seas or exclusive economic zones [17]. Under Article 42, coastal states bordering a strait "shall not hamper transit passage," and transit passage "shall not be suspended" [17].

Critically, Article 26 permits charges on transiting vessels only "as payment for specific services rendered" — pilotage, tugs, navigational assistance — not for the act of passage itself [17]. No blanket toll is contemplated.

The IMO spokesperson stated plainly: "Any such toll will set a dangerous precedent" [3].

But the legal picture contains a significant complication: neither Iran nor the United States has ratified UNCLOS [18][19]. Iran signed the convention in 1982 but never ratified it, and upon signing declared that transit passage provisions were "quid pro quo bargains for treaty parties" rather than codifications of customary international law [18]. Iran's 1993 national maritime law recognizes only "innocent passage" — a more restrictive regime that, unlike transit passage, can be suspended by the coastal state and may require authorization for warships or vessels carrying hazardous materials [18].

The United States argues that transit passage has crystallized into binding customary international law applicable to all states, including non-parties [18]. Most Western maritime law scholars agree. But the mutual non-party status creates what scholars at UNCLOSdebate.org have described as a "legal vortex" — both countries invoke the convention selectively and in contradictory ways [18].

One additional ambiguity: the 1949 Corfu Channel case at the International Court of Justice established that passage through international straits during peacetime cannot be impeded, but it did not address armed conflict scenarios [18]. The San Remo Manual on International Law Applicable to Armed Conflicts at Sea recognizes blockade as permissible under specific conditions — formal declaration, effective enforcement, and impartial application — but the current situation does not clearly fit that framework either, as Iran selectively permits passage for allied nations while blocking others [18].

The Steelman Case for Iran

Iran's position, stripped to its strongest form, rests on several arguments. First, Iran bears the material costs of policing the strait — naval patrols, search-and-rescue operations, and environmental management — while receiving no compensation from the roughly $1.5 trillion in annual trade that passes through its territorial waters [20]. Second, Iran never ratified UNCLOS, and should not be bound by provisions it explicitly rejected upon signing [18]. Third, the precedent of Turkey's Montreux Convention fees — however limited in scope — demonstrates that strait states can collect payments from transiting vessels under international agreements [21].

Turkey collects fees in the Bosphorus and Dardanelles under the 1936 Montreux Convention, though these are formally linked to specific services (pilotage, lighthouse maintenance, sanitary control) rather than passage rights as such [21]. Turkey raised these fees fivefold in 2022 [21]. Singapore charges compulsory pilotage fees in the Strait of Malacca approaches [22]. Neither precedent involves blanket transit tolls on a natural international strait, but Iran can argue the distinction between "service fees" and "tolls" is more semantic than legal scholars admit.

Iranian legal scholars and sympathetic analysts at outlets like TRT World have also pointed to the asymmetry in the current order: the nations that most vigorously defend unrestricted transit passage are the ones whose navies patrol the strait, while Iran — the state most directly affected by traffic through its waters — has the least say in how passage is governed [20].

The weakness of this argument is that UNCLOS was negotiated precisely to balance coastal state sovereignty against the global interest in free navigation, and that 172 nations have accepted this balance through ratification. Iran's position also suffers from the selective nature of its enforcement — charging tolls to some nations while blocking others does not resemble a good-faith exercise of sovereign regulatory authority.

Military Posture and the 1987-88 Parallel

The United States currently has its largest naval presence in the Middle East since the regional crisis began in 2023. The USS Abraham Lincoln Carrier Strike Group, equipped with F/A-18E Super Hornets, F-35C Lightning IIs, and guided-missile destroyers, is operating in the Arabian Sea [23]. The USS Gerald R. Ford Carrier Strike Group is positioned in the Red Sea [23]. Additional assets include guided-missile destroyers USS Mitscher and USS Roosevelt, and three Littoral Combat Ships outfitted with mine countermeasure packages [23]. The U.S. Fifth Fleet headquarters in Bahrain coordinates operations [23].

Trump's threats have escalated from "hell will reign down" on Iran (April 4) to warnings of attacks on power plants and bridges if the strait is not opened [5][7]. His language echoes — but exceeds — the rhetoric of the 1987-88 Tanker War, when the Reagan administration conducted Operation Earnest Will to escort Kuwaiti tankers through the Gulf during the Iran-Iraq War.

The comparison is instructive. During the Tanker War, approximately 546 commercial vessels were attacked over a two-year period, but the strait itself was never fully closed [24]. The current crisis has achieved what the Tanker War did not: near-total commercial cessation. The scale of U.S. military deployment is also substantially larger. During Earnest Will, the Navy committed approximately 30 vessels; the current posture involves two full carrier strike groups plus additional surface combatants [23].

The legal authority for military action is contested. The Trump administration has invoked the 2001 Authorization for Use of Military Force (AUMF) and Article II commander-in-chief powers, but legal scholars have questioned whether either covers offensive operations against Iranian infrastructure to reopen a shipping lane [7].

Alternatives and Their Limits

Gulf producers have not been idle. Saudi Arabia's East-West pipeline (the Petroline), stretching roughly 750 miles from Abqaiq to the Red Sea port of Yanbu, has a design capacity of approximately 7 million barrels per day following recent expansions [25]. The UAE's Abu Dhabi Crude Oil Pipeline (ADCOP) can move an additional 1.5 million barrels per day to the port of Fujairah, bypassing Hormuz entirely [25].

But combined pipeline capacity of roughly 9 million barrels per day covers less than half the strait's pre-crisis throughput of 20 million barrels per day [25]. For volumes exceeding pipeline capacity, tankers must reroute around the Cape of Good Hope — adding weeks and substantial cost to voyages bound for Europe or Asia [25]. Complicating matters further, Houthi threats in the Red Sea and Bab el-Mandeb Strait mean that even the Yanbu-to-Suez route carries risk [26].

For Asian importers, the math is bleak. Japan, South Korea, and India cannot quickly diversify away from Middle Eastern oil. China has pipeline connections to Russia and Central Asia that provide partial insulation, but these cannot substitute for the 37.7% of Hormuz crude flows that China received in 2024 [12][13]. No existing infrastructure provides a viable full alternative to the strait for the roughly 20 million barrels per day that transited it.

The Precedent Problem

The most consequential dimension of the crisis may be what happens next — not in the Gulf, but at every other chokepoint on the map.

Maritime law expert Julien Raynaut warned that "an Iranian tollbooth could lead China to conclude that it could restrict movement in the Taiwan Strait" [27]. The South China Sea carries roughly one-third of global shipping [28]. The Strait of Malacca is the world's busiest oil transit corridor [28]. The Suez Canal and Danish Straits are similarly indispensable.

If a state can impose tolls on an international strait through military coercion and have those payments made — as the IRGC has already done — the template exists for every other strategic waterway [28]. One maritime law professor quoted by Fortune described unrestricted toll-collection on international straits as "the end of an international society" [27].

A 2026 World Economic Forum report noted that the real story is "the proliferation of chokepoints across geography, infrastructure, industry and the digital world" as terrain for geopolitical competition [28]. Egypt nationalized the Suez Canal in 1956 and provoked a military invasion by Britain, France, and Israel. Iran's toll scheme represents the most significant attempt to restructure global maritime access since then [28].

The question facing the international community is whether it treats Iran's toll demand as a wartime aberration to be reversed or as a precedent to be absorbed. The answer will shape not just the outcome of this ceasefire, but the rules governing global trade for decades.

What Comes Next

The two-week ceasefire announced on April 7 is already fraying. Israel has expanded strikes in Lebanon, Iran has accused the U.S. of violating the agreement, and the strait remains largely closed despite ceasefire terms calling for it to be opened "immediately, without limitation" [16][29]. Trump has threatened renewed attacks if Iran does not comply, while Mojtaba Khamenei has pledged to "take revenge" for casualties and insisted on Iran's right to control the waterway [7][16].

Saudi Arabia has called for the strait to be kept open "without any restrictions" [1]. Gulf Arab states, which shut in 12 million barrels per day when the strait closed, are the most immediate economic victims after Iran itself.

The IMO's statement, while firm, carries no enforcement mechanism. The UN Security Council is unlikely to act, given Russian and Chinese interests in the current arrangement — both have been granted preferential passage by Iran [10]. And Trump's own rhetoric has swung between threatening Iran over tolls and musing about collecting them jointly, creating uncertainty about the U.S. position [6].

In the meantime, the IRGC continues to collect fees at Larak Island. Oil trades above $114 a barrel. And the 21-mile gap in international law that separates Iran from Oman remains the most expensive stretch of water on earth.