Iran Imposes Transit Fees on Ships Passing Through Strait of Hormuz

Iran has begun extracting payments of up to $2 million per voyage from commercial vessels transiting the Strait of Hormuz, according to Bloomberg and Iranian lawmakers [1][2]. The charges — imposed on an ad hoc, case-by-case basis during an active military conflict — represent an unprecedented attempt by a coastal state to levy tolls on the world's most important energy chokepoint, through which roughly 20 million barrels of oil pass each day [3].

The fees have added a new dimension to an already severe crisis. Since February 28, 2026, when the United States and Israel launched coordinated airstrikes against Iranian military and nuclear facilities under Operation Epic Fury, Iran's Islamic Revolutionary Guard Corps (IRGC) has declared the strait effectively closed to vessels from hostile nations, attacked more than 21 merchant ships, and caused tanker traffic to drop by approximately 70% [4][5].

What Iran Is Charging and How

Iranian lawmaker Alaeddin Boroujerdi confirmed that the government has begun collecting transit fees, telling Iranian media: "Now, because war has costs, naturally we must do this and take transit fees from ships passing through the Strait of Hormuz" [2][6]. He described the policy as a demonstration of Iran's "authority" over the waterway.

The fee structure remains opaque. Payments of as much as $2 million per voyage are being sought, but the mechanism is unclear — including what currency is accepted — and enforcement appears selective rather than systematic [1]. Bloomberg reported that some vessels have already paid, though which flag states or operators complied has not been publicly disclosed [1].

Iran's parliament is preparing legislation to formalize the charges. A member of the economic committee argued that collecting such fees is "common on many important maritime routes around the world" and would "strengthen Iran's revenue and improve safety and maritime services in the strait" [7][8]. The bill would establish a formal toll-and-tax framework for Hormuz transit.

Experts caution that the $2 million figure may reflect risk-based negotiated payments — effectively ransom in a war zone — rather than a codified tariff [9]. The distinction matters for how international law treats these charges.

The Chokepoint: Scale and Exposure

The Strait of Hormuz is, by any measure, the most consequential maritime corridor on Earth. In the first half of 2025, approximately 20.9 million barrels per day of oil flowed through it — including 15 million barrels per day of crude oil and condensate and 5.5 million barrels per day of refined products [3][10]. That volume accounts for more than 25% of all seaborne oil trade and about 20% of global petroleum consumption [3]. Around one-fifth of global liquefied natural gas (LNG) trade, primarily from Qatar, also transits the strait [10].

Source: EIA / CNBC / Zero Carbon Analytics

Data as of Mar 24, 2026CSV

The exposure is concentrated in Asia. In 2024, 84% of crude oil and 83% of LNG moving through Hormuz went to Asian markets [10]. Japan depends on the strait for roughly 75% of its oil imports, South Korea for 65%, India for close to 50%, and China for approximately 40% [11][12]. By contrast, only about 7% of U.S. crude imports — roughly 500,000 barrels per day — transit Hormuz [10].

Saudi Arabia leads the export side, accounting for 38% of crude flows through the strait at 5.5 million barrels per day in 2024 [10]. For Gulf Arab producers, any toll imposed by Iran on their primary export route is, as multiple regional officials have stated, a matter of sovereignty [1].

Revenue Potential vs. Iran's Fiscal Reality

If Iran could systematically collect $2 million per large vessel transit, the revenue would be substantial — but the actual numbers depend on assumptions that currently lack support.

Before the crisis, approximately 60 to 70 vessels transited the strait daily [3]. At $2 million each, a fully operational toll would theoretically generate $120–140 million per day, or roughly $44–51 billion annually. That figure would represent a transformative revenue source for a government whose total projected budget revenues amount to approximately $45 billion and whose oil export earnings were $65.8 billion in the most recent fiscal year — figures that were already declining sharply due to tightened sanctions [13].

In practice, however, Iran is collecting from only a fraction of transiting vessels under wartime conditions, with traffic volumes down 70% [4]. The selective, informal nature of the charges makes reliable revenue estimates impossible. What is clear is that Iran's economy is under extreme strain: GDP has contracted from roughly $600 billion in 2010 to an estimated $356 billion in 2025, crude oil loadings from Iranian terminals fell 26% year-over-year in January 2026, and Chinese purchases of Iranian crude — virtually Iran's only remaining major buyer — have dropped to 1.13 million barrels per day [13].

The transit fees, whatever they ultimately yield, represent an attempt to generate hard currency outside the sanctions framework.

The Legal Question: UNCLOS and Transit Passage

The legal basis for Iran's fees is weak under prevailing international maritime law.

The Strait of Hormuz qualifies as a "strait used for international navigation" under the United Nations Convention on the Law of the Sea (UNCLOS), specifically Part III, Articles 37–44 [14]. Under the transit passage regime, all ships and aircraft enjoy the right of passage through such straits for "continuous and expeditious transit" [14]. Critically, UNCLOS stipulates that coastal states bordering international straits "shall not hamper transit passage and shall not suspend it" — even for security reasons that might justify suspending innocent passage in ordinary territorial waters [14][15].

UNCLOS Article 26 addresses charges: coastal states may not levy fees on foreign ships "by reason only of their passage through the territorial sea" [14]. The only permissible charges are for specific services rendered to a vessel — such as pilotage — and these must be non-discriminatory [15].

India has been explicit in its legal position. Indian officials stated that "international laws guarantee the right of freedom for navigation through the strait and no one can levy any fee for use of the channel" [1]. Iran, for its part, is not a party to UNCLOS, though it signed but never ratified the convention [15]. Iran has historically asserted sovereignty claims over the strait that extend beyond what UNCLOS permits.

The distinction between a natural strait and an artificial canal is central. The Suez and Panama canals are man-made waterways operated by sovereign authorities that provide specific, costly services — dredging, lock operations, pilotage, vessel traffic management, lighting, and emergency response [16]. A mid-range tanker pays approximately $274,000–$280,000 to transit either canal, while a very large gas carrier pays roughly $488,000–$505,000 [16]. These fees reflect the massive capital investment and ongoing maintenance costs of artificial infrastructure.

The Strait of Hormuz, by contrast, is a natural waterway. Iran has not historically provided pilotage services, operated navigational aids, or maintained the shipping lanes used by transit traffic. The fees Iran is now demanding — at $2 million per vessel, roughly 4–7 times what canals charge — come without any comparable service provision [7][9].

Enforcement: Boarding, Detention, and Attacks

Iran's enforcement capacity is real and has been demonstrated. Since the onset of the conflict, the IRGC Navy has:

• Declared the strait closed to vessels from the U.S., Israel, and their allies as of March 5 [4]
• Attacked more than 21 merchant ships [4]
• Caused over 150 vessels to anchor outside the strait to avoid transiting [4]
• Issued warnings prohibiting passage, backed by missile and drone threats [5]

The U.S. Maritime Administration (MARAD) has issued multiple advisories warning of "Iranian illegal boarding, detention, and seizure" of vessels in the Persian Gulf, Strait of Hormuz, and Gulf of Oman [17]. U.S.-flagged vessels have been advised to maintain contact with Naval Forces Central Command.

Historical precedent for Iran's actions includes the "Tanker War" of 1984–1988 during the Iran-Iraq conflict, when Iran attacked commercial shipping to pressure Iraq's Gulf state backers. The current situation is more severe: the International Energy Agency's Fatih Birol has said the disruption is "worse than the combined oil crises of 1973 and 1979, which together lost 10 million barrels per day" [5].

Oil Prices and Insurance: The Cascading Economic Impact

The market reaction has been swift. WTI crude oil prices rose from approximately $67 per barrel in late February to over $98 by mid-March 2026 — a roughly 47% surge in under three weeks [18].

Source: FRED / U.S. Energy Information Administration

Data as of Mar 16, 2026CSV

Shipping insurance costs have surged in parallel. War-risk premiums for Strait of Hormuz transits have increased more than 300%, from 0.125% to between 0.2% and 0.4% of vessel insurance value per transit [19]. For very large crude carriers (VLCCs), that translates to an additional quarter of a million dollars per voyage [19]. These costs are passed along the supply chain — to refiners, to distributors, and ultimately to consumers.

The Dallas Federal Reserve modeled three scenarios based on closure duration [20]:

• One-quarter closure: Global GDP contracts by 2.9 percentage points (annualized) in Q2 2026, with oil prices reaching $98/barrel, followed by a recovery
• Two-quarter closure: Sustained contraction through Q3, oil reaching $115/barrel
• Three-quarter closure: Persistent negative growth through Q4, oil potentially reaching $132/barrel

The research noted that these projections may understate the impact because "dislocations in the oil tanker market" could push prices higher than the model captures [20].

Source: GDELT Project

Data as of Mar 24, 2026CSV

Services or Shakedown? The Core Dispute

Iran's lawmakers have framed the transit fees as compensation for maritime security services, drawing parallels with the Suez and Panama canals [7][8]. The argument has limited merit.

In favor of Iran's position: Tehran does maintain naval patrols, radar stations, and port facilities along the strait. Iran's IRGC Navy operates rescue and response capabilities in the region, and Iranian territorial waters do extend into the shipping lanes — the strait is only 21 nautical miles wide at its narrowest, with the shipping lanes running through Omani and Iranian waters [10].

Against Iran's position: the fees emerged only after hostilities began, are being collected selectively from vessels Iran deems cooperative, and at price points ($2 million) that far exceed any service-cost justification [1][9]. No new navigational infrastructure has been deployed. The charges are explicitly linked to "war costs" by the Iranian officials announcing them [2][6]. Ships that decline to pay face the implicit threat of being added to the list of vessels that cannot transit safely — a dynamic more consistent with extortion than a fee-for-service arrangement.

The consensus among maritime law scholars and Western governments is that these are not legitimate service charges but a form of wartime revenue extraction that violates the transit passage regime [9][15].

Military and Diplomatic Escalation Pathways

The crisis has triggered a multinational response. France announced a "purely defensive" escort mission with two frigates [4]. A coalition including the UAE, Bahrain, Canada, South Korea, Australia, and multiple European states has issued a joint statement on securing the strait [4]. The U.S. Navy has deployed additional assets, including the USS Tripoli, to the region [21].

The escalation dynamics are precarious. On March 23, President Trump announced that the U.S. was in direct negotiations with senior Iranian officials and would suspend strikes on Iran's energy infrastructure for five days while talks continued [22][23]. Iran's government denied the talks were happening, with IRGC-linked sources warning of "special plans" for retaliation [22].

The transit fee question is intertwined with the broader war and nuclear negotiations. Iran's remaining leverage — its ability to disrupt Hormuz — is precisely the asset it is now monetizing. Accepting the fees would validate Iran's claim to sovereignty over the strait; refusing them militarily risks further escalation in an already active conflict.

Bypass Options and Their Limits

Some alternatives exist but are insufficient at scale. Saudi Arabia's East-West Pipeline has 5 million barrels per day of capacity, and the UAE's pipeline to Fujairah on the Indian Ocean coast carries 1.8 million barrels per day [10]. Together, the available bypass capacity is estimated at roughly 2.6 million barrels per day — replacing only about 13% of the 20 million barrels per day that normally transit Hormuz [10].

Rerouting vessels around the Cape of Good Hope adds weeks to transit times and increases fuel and insurance costs considerably [19]. For LNG shipments from Qatar — the world's largest LNG exporter — there is no pipeline alternative; every cargo must pass through the strait.

The Dallas Fed estimates that reducing the oil supply shortfall from 20% to 10% through pipeline alternatives and negotiated exemptions would lower the GDP impact from -2.9 to -1.6 percentage points in the first quarter of disruption [20]. Helpful, but far from neutralizing the damage.

What Comes Next

The transit fees are one element of a broader crisis that has reshaped global energy markets in a matter of weeks. Whether Iran formalizes the charges through legislation, whether shipping companies and flag states comply or resist, and whether military escorts can reopen the strait to free passage will depend on the trajectory of the war and negotiations.

For the moment, the $2 million toll is less a maritime policy than a wartime fact on the water — extracted under duress, without legal basis, and at a price point that reflects Iran's desperation and its leverage in roughly equal measure.