Iran Proposes Toll Collection for Ships Transiting the Strait of Hormuz

Iran's 10-point proposal for ending its war with the United States and Israel contains a provision that, if accepted, would upend a principle of international commerce older than most nation-states: the free passage of merchant ships through the Strait of Hormuz [1]. Tehran is demanding the right — shared with Oman — to collect tolls from vessels transiting the 21-mile-wide chokepoint through which roughly 20 million barrels of oil per day flowed before the current conflict began [2]. The proposal has drawn opposition from the White House, Gulf Arab states, and maritime law scholars, but Iran has already begun collecting fees from some ships, with at least two vessels paying approximately $2 million each in Chinese yuan [3].

The implications reach far beyond the Persian Gulf. At stake is roughly 20% of global petroleum liquids consumption, the energy security of Asia's largest economies, and a legal precedent that could be replicated at chokepoints from Gibraltar to Malacca [1].

What Flows Through Hormuz — and What a Toll Would Cost

Before the February 2026 near-total collapse of tanker traffic through the strait, an average of 20.9 million barrels per day of crude oil and petroleum products transited Hormuz in the first half of 2025 — roughly 15 million barrels per day of crude and condensate, plus 5.5 million barrels per day of refined products [2]. That volume represented approximately 25–27% of all seaborne oil trade globally [4].

Source: EIA / Visual Capitalist

Data as of Jan 1, 2025CSV

China alone accounted for 5.7 million barrels per day of crude flows through the strait, followed by India at 2.2 million, South Korea at 1.8 million, and Japan at 1.6 million [5]. Together, these four countries received 69% of all Hormuz crude flows in 2024 [5].

An Iranian lawmaker suggested fees "upwards of $2 million per vessel" [1]. For a large tanker carrying approximately 2 million barrels, that translates to roughly $1 per barrel — a cost that maritime experts say would most likely be borne by Gulf oil producers, not end consumers, since buyers could source crude from non-Gulf suppliers [1]. At pre-crisis traffic volumes, even a modest toll of $0.10 per barrel would generate over $700 million annually for Iran; at $1 per barrel, the figure exceeds $7 billion — a substantial sum for a war-damaged economy that Iran says it would direct toward reconstruction [1].

The Legal Framework: What UNCLOS Says — and Whether It Applies to Iran

The United Nations Convention on the Law of the Sea (UNCLOS), adopted in 1982, establishes the legal regime for international straits in Part III, Articles 37 through 44. Article 38 grants all ships and aircraft the right of "transit passage" — defined as continuous and expeditious transit — through straits used for international navigation [6]. Article 42 permits bordering states to adopt laws relating to safety, pollution, fishing, and customs, but does not authorize the imposition of tolls or fees solely for passage [7].

Iran signed UNCLOS on December 10, 1982, but has never ratified it [8]. Upon signing, the Iranian government declared that certain provisions, including the transit passage regime, were "quid pro quo" bargains among treaty parties rather than codifications of existing customary international law [8]. Iran's 1993 "Law of Marine Areas of the Islamic Republic of Iran in the Persian Gulf and Oman Sea" allows Tehran to suspend passage of foreign ships in its territorial waters and requires prior authorization for warships and vessels carrying hazardous materials [9].

The United States has also not ratified UNCLOS [8]. However, Washington — along with most maritime nations — considers the transit passage regime to reflect customary international law binding on all states regardless of treaty membership. Maritime law scholar Philippe Delebecque has stated: "Freedom of navigation has always been recognized, including specifically in straits" [1].

The legal picture is further complicated by Iran's framing of tolls as covering "security and environmental maintenance" costs [10]. Some international law scholars have noted that UNCLOS inadequately addresses the environmental burden on strait states from high-volume commercial transit, and that bordering nations have legitimate but underexplored claims to cost recovery for pollution mitigation and search-and-rescue operations [10]. A recent paper by Abbas Poorhashemi examined the legal analysis of imposing tariffs and fees in the Strait of Hormuz, finding tension between sovereign rights and the constraints of international law [10]. However, the scholarly consensus remains that the current framework does not permit environmental surcharges that function as de facto tolls [10].

Historical Precedents: From the Øresund to Suez

Iran's proposal is not without historical precedent, though those precedents mostly serve as cautionary tales for toll-collecting states.

Denmark's Sound Dues, imposed on ships passing through the Øresund Strait beginning in 1429, constituted up to two-thirds of the Danish Crown's income during the 16th and 17th centuries [11]. Every foreign vessel, regardless of destination, was required to stop at Helsingør and pay a toll. The system endured for over four centuries before international pressure — led by Britain, France, Prussia, and Russia — led to the Copenhagen Convention of 1857, which abolished the dues in perpetuity in exchange for a one-time lump-sum payment of 33.5 million rix-dollars to Denmark [11]. The Danish Straits became among the first international waterways with a treaty-based guarantee of free commercial transit [11].

The Suez and Panama Canals represent a different legal category. As artificial waterways, they are under the jurisdiction of their respective sovereign operators and can charge tolls to recover construction, maintenance, and operation costs [10]. Natural straits like Hormuz fall under a distinct regime in international law — one that prohibits the levying of fees solely for passage [7].

The distinction matters. Iran's proposal effectively asks the world to treat a natural strait like a man-made canal, granting Tehran the same fee-collecting authority that Egypt exercises over Suez. No state has successfully imposed permanent tolls on a natural international strait since the abolition of the Sound Dues in 1857.

Iran's History of Coercion at Hormuz

The current toll proposal exists within a pattern of Iranian use of Hormuz as a pressure instrument spanning four decades.

Source: EIA / Reuters

Data as of Apr 1, 2026CSV

During the Iran-Iraq War (1980–1988), the "Tanker War" saw Iran and Iraq collectively attack over 450 merchant vessels in the Persian Gulf and Strait of Hormuz — Iraq responsible for 283 attacks, Iran for 168 [12]. The crisis prompted the United States to reflag and escort Kuwaiti tankers under Operation Earnest Will in 1987 [12].

In 2011–2012, as U.S. and European sanctions pressure intensified over Iran's nuclear program, Tehran threatened to close the strait entirely [13]. Oil prices spiked 8% on the threat alone, though Iran never followed through [13].

In July 2019, Iranian forces seized the British-flagged tanker Stena Impero in the strait, part of a broader pattern of tanker seizures and counter-seizures that became bargaining chips in the sanctions standoff [13]. The seizures pushed war-risk insurance premiums in the Gulf to their highest levels since the 1980s [13].

In April 2024, Iran's IRGC Navy seized the container ship MSC Aries in a helicopter raid near Hormuz — the first seizure of a ship connected to Israel [13].

The current crisis, triggered by the February 28, 2026 conflict, resulted in a near-total collapse of tanker traffic and has driven WTI crude oil prices to $114.01 per barrel as of early April 2026, an 86.7% increase year-over-year [14].

Source: FRED / EIA

Data as of Apr 6, 2026CSV

Asia's Exposure: Who Bears the Cost

The toll proposal's most direct impact falls on Asian economies, which collectively account for 75% of oil and 59% of liquefied natural gas flows through the strait [5].

Japan relies on the Middle East for approximately 90% of its crude oil imports, most of which passes through Hormuz [5]. South Korea sources about 70% of its crude from the Middle East, routing more than 95% of that through the strait [15]. India depended on Gulf nations for at least 50% of its oil and gas imports in 2024 [15]. China sourced roughly 35% of its oil supplies from the region [15].

For these nations, a $1-per-barrel toll would add between $584 million (Japan) and $2.08 billion (China) to annual import costs based on 2024 flow volumes — on top of already-elevated insurance premiums. War-risk insurance for transiting Hormuz has surged since the conflict began, adding costs that dwarf any proposed toll [15].

Iran has implemented a selective passage system since the conflict began. Pakistan, India, Thailand, Russia, Turkey, China, Iraq, and Malaysia have all successfully had vessels pass through after negotiating bilateral arrangements with Tehran [16]. The IRGC operates a two-corridor system — a northern corridor under its direct control and a southern corridor along the Omani coastline — with access determined by geopolitical alignment [16]. The strait is effectively "closed" to the U.S., Israel, and their active military supporters [16].

The Dollar Dimension: Yuan Tolls and Financial Realignment

The toll payments already collected have been denominated in Chinese yuan, not U.S. dollars — a detail with implications beyond the strait itself [3].

According to Bloomberg reporting, at least two vessels that transited Hormuz paid fees in yuan, with one transit brokered by a Chinese maritime services company acting as intermediary [3]. China's Ministry of Commerce acknowledged the arrangement [17]. The system allows both Iran and China to circumvent U.S. sanctions imposed through the dollar-dominated financial infrastructure, and it aligns with Xi Jinping's stated objective of elevating the yuan's role in international commerce [17].

China purchases over 80% of Iran's oil exports at discounted rates, transactions widely understood to be conducted in yuan [17]. Iran reciprocates by importing Chinese machinery, electronics, chemicals, and industrial components [17].

However, structural constraints limit the yuan's capacity to displace the dollar. The yuan represented only 2% of global foreign exchange reserves in 2025, compared with 57% for the dollar, and only 3.7% of cross-border trade settled in yuan in 2024 [17]. Analysts describe the dynamic as "gradual erosion rather than an abrupt substitution" of dollar hegemony [17].

Who Benefits from Sustained Uncertainty

Russia and China vetoed a UN Security Council resolution on April 7 aimed at protecting commercial shipping in the Strait of Hormuz [18]. The draft, sponsored by Bahrain, Jordan, Kuwait, Qatar, Saudi Arabia, and the UAE, sought to coordinate maritime security efforts and demand Iran cease impeding transit [18]. Eleven nations voted in favor; Colombia and Pakistan abstained [18].

Russia's Ambassador Vassily Nebenzia argued the resolution presented "Iranian actions as the sole source of regional tensions" while omitting references to "illegal attacks by the United States and Israel" [18]. China's Ambassador Fu Cong said the draft "failed to capture the root causes and the full picture of the conflict in a comprehensive and balanced manner" [18].

The vetoes reflect material interests beyond diplomatic solidarity with Tehran. With 20% of global oil removed from the market by the Hormuz disruption, prices have surged — a windfall for Russia, whose oil is in greater demand despite Western sanctions [19]. Reopening the strait would return approximately 20 million barrels per day to the market and push prices lower, eliminating that advantage [19].

Chinese state-linked insurers also stand to gain. Western Protection & Indemnity (P&I) clubs — the mutual insurers that cover most global shipping — face compliance constraints that make insuring toll-paying vessels through Hormuz legally uncertain. Chinese insurers operating outside Western sanctions enforcement could step in, expanding their share of the global maritime insurance market [17].

Russian tanker operators, already operating largely outside the Western sanctions infrastructure through the "shadow fleet," face fewer barriers to paying Iranian tolls than their Western counterparts [19].

Military Escalation Pathways

If the United States or a coalition were to physically enforce freedom of navigation against Iranian toll collection, the escalation risks are significant.

Iran has built a layered anti-access/area-denial posture around the strait. Its anti-ship missile inventory includes the Khalij Fars (300-kilometer range, electro-optical seeker), the Abu Mahdi long-range cruise missile (exceeding 1,000-kilometer range, sea-skimming terminal phase), and the Zolfaghar Basir anti-ship ballistic missile (1,000-kilometer range) [20]. The IRGC Navy operates over 1,500 fast-attack craft designed for "swarm" tactics, including the Heydar-110 missile boat, which reportedly exceeds 110 knots [20].

Open-source estimates place Iran's naval mine stockpile at 5,000 to 6,000 units, including bottom and influence mines that are slow to clear [20]. Even suspected mines can halt commercial traffic, spike insurance rates, and force time-consuming mine countermeasures operations [20].

Iran's doctrine relies on saturation — pairing ballistic threats with cruise missiles, drones, and swarming surface craft to overload sensors and deplete defensive missile magazines [20]. The Abu Mahdi missile poses a particular threat to U.S. logistics and support vessels, which generally lack the robust missile defense systems carried by destroyers [21].

However, the February–March 2026 campaign (Operation Epic Fury) reportedly inflicted significant damage on Iranian naval forces [22]. The extent of remaining Iranian maritime capability is contested, with some analysts arguing that sustained U.S. strikes have substantially degraded the IRGC Navy's operational capacity [22].

The White House has stated that President Trump wants the strait reopened "immediately, without limitation, including tolls" [23]. Whether that position translates to military enforcement of free passage — or remains a negotiating demand in ceasefire talks — is the central question of the current standoff.

What Happens Next

Iran's toll proposal sits at the intersection of wartime bargaining, international law, great-power competition, and energy security. The demand may ultimately prove to be a negotiating position that gets traded away in ceasefire talks. But the precedent of even partial implementation — yuan-denominated fees collected under IRGC supervision, with Chinese intermediaries facilitating the transactions — has already demonstrated a model that other chokepoint-bordering states will study.

Experts warn that accepting tolls at Hormuz, even temporarily, could invite similar demands at the Strait of Gibraltar, the Strait of Malacca, the Bab el-Mandeb, or the Turkish Straits [1]. Maritime law scholar Philippe Delebecque cautioned that the precedent would undermine "a basic and enduring principle of international maritime trade" [1].

The question is whether the international community — fractured by the U.S.-Iran war, divided at the Security Council, and facing $114-per-barrel oil — has the collective will to enforce that principle.