What started as a campaign to diminish Iran’s nuclear capabilities and weaken its global terror networks has morphed into a dispute over control of one of the world’s most important trade routes.
The Iran war has become a battle for the Strait of Hormuz, a global chokepoint for oil, natural gas, fertilizer and other commodities.
If the conflict leaves Hormuz under the permanent control of Iran – or the United States – it could spell the beginning of the end of free passage on the open seas, a concept that has underpinned global trade for centuries.
“This could set a dangerous precedent and make international seaborne trade much more expensive, a cost that would ultimately be passed on to end-consumers,” Erik Grundt, a senior analyst at consultancy Rystad Energy, told CNN.
Iran’s new energy weapon
Following the start of US- and Israeli-led attacks on February 28, Iran almost immediately declared the Strait of Hormuz closed, creating the largest oil supply shock in history.
Having gained a new source of leverage over the global economy, Tehran is fighting hard to keep it.
Vessels that wish to transit the strait must either coordinate with Iran’s newly established Persian Gulf Strait Authority, which can entail hefty payments, or risk being fired on by Iran’s armed forces, the Revolutionary Guard Corps.
While the fees were temporarily paused when Iran signed a 60-day Memorandum of Understanding with the United States on June 18, Iran’s control of transits via the PGSA hasn’t stopped.
Quite the opposite. Iran has seized on one particular clause in the MOU, calling on Tehran to “make arrangements… for the safe passage of commercial vessels,” to legitimize and cement its control of the strait. Iran on Tuesday claimed that more than 200 non-Iranian vessels coordinated with its Persian Gulf Strait Authority in the three weeks after the MOU was signed, but CNN could not independently verify that claim.
The Trump administration, meanwhile, believed the clause meant that ships would be free to transit the strait without restriction through the 60-day period. Transits certainly picked up, with some 70 vessels a day getting through the strait at the post-MOU peak, about half the number that flowed through on any given day before the war.
But the resumption of tensions in the strait have slowed those transits to a trickle – just over a dozen on Sunday.
President Donald Trump briefly took a page out of Iran’s playbook, declaring that the United States would charge commercial ships going through Hormuz a 20% fee for US efforts to protect the waterway – a threat he gave up less than 24 hours after he posted it on social media.
That would have amounted to approximately $27 million per voyage for a very large oil tanker, according to shipping association BIMCO.
Despite the absurdity of the price, Trump’s threat legitimized Iran’s actions – an irony the regime was quick to point out, sarcastically, on social media.
Iran, for its part, has said Trump’s fee is too high. “20% is of course too much,” Iranian foreign minister Abbas Araghchi wrote on X Monday. “We will be fair.”
The problem with tolls
If Hormuz tolls become the way of the water, shipping costs could rise, noted Rob Thummel, senior portfolio manager at Tortoise Capital.
The expense is a concern – but not the main one.
Iran had reportedly been charging oil tankers $1 to $2 per barrel on board, taking home roughly $2 million per Very Large Crude Carrier (VLCC).
However, even if shipping companies were willing to pay, insurers would refuse cover to ships that make payments to sanctioned entities, which includes several key Iranian institutions.
“Forget the legal arguments, insurers will settle this first,” said Nigel Green, CEO of financial advisory giant deVere Group. “Involve a toll with sanctions risk and underwriters could simply stop writing cover.”
Even if a third party such as Oman collected the fees, tolls would likely still breach international maritime laws, including the United Nations Convention on the Law of the Sea (UNCLOS), allowing insurers to reject voyages or terminate cover.
There is a wider concern too: that monetization of Hormuz could set a precedent for other global chokepoints, encouraging countries from Indonesia and Singapore to China, Taiwan and the United Kingdom, to weaponize their geography.
Across 10 major global chokepoints, including Hormuz, Gibraltar, Taiwan, Dover and Malacca, potential annual passage revenues would be worth more than $136 billion a year, amounting to an enormous “untapped” sovereign revenue opportunity, according to an estimate by senior Rystad Energy analysts Michelle Brouhard and Emmanuel Belostrino.
“A world of monetized chokepoints is likely to be more inflationary, more fragmented and more militarized,” they said.