The Strait of Hormuz: A Toll Road in the Making?

The conflict in Iran has pushed global trade to the brink, with even the most basic principles being reevaluated. The Strait of Hormuz, a critical waterway connecting the Persian Gulf to the Arabian Sea, is now on the verge of becoming a toll road.

Since the outbreak of war on February 28th, global oil and LNG shipments through the Strait have plummeted to a handful per day, according to Kpler, a maritime intelligence firm. The US has responded with airstrikes against Iranian military targets, while Iran has retaliated with missile and drone attacks on US forces and shipping-related targets.

The Joint Maritime Information Center (JMIC) has issued several warnings about the heightened threat environment in the Strait of Hormuz. In its latest operational update, JMIC counted 10 Iranian attacks on shipping since June 25th, maintaining a severe threat level for the waterway. The center warned that IRGC attacks, hailing, and routing pressure continue to affect AIS-active vessels.

The Iranian Revolutionary Guard Corps (IRGC) has taken an aggressive stance, claiming two oil tankers were left immobilized after attempting to cross what they described as an unsafe southern route through the Strait. They accused the US military of encouraging the vessels to use this passage, and vowed to respond with a “punitive operation” if the US continues its strikes.

Shipping companies are facing new challenges beyond higher insurance rates and contractual risk. Crews are increasingly unwilling to sail through the strait, regardless of assurances or incentives offered to them. Dimitris Maniatis, CEO of Marisks, noted during a Lloyd’s List Intelligence briefing: “It’s not about money anymore; it’s purely about the fear governing decision-making right now.”

In this context, proposals for introducing tolls or fees on vessels passing through the Strait are gaining traction. Iran and Oman have suggested implementing charges, with Tehran proposing mandatory fees and Muscat reportedly exploring a voluntary fee model similar to those used in other strategic waterways.

The proposed fees could net Iran and Oman $6.8 billion per year – roughly 1.2% of their combined GDP – if implemented at pre-war oil shipping volumes. However, this calculation excludes fees for LNG and other non-crude shipments, which would significantly increase the true cost of such a system.

Several experts have proposed treating the Gulf as a shared regional common market and imposing transit fees on the largest oil tankers using the region. This approach aims to ensure that those posing the greatest environmental risk contribute to the waterway’s upkeep while having little impact on carriers.

However, this toll-road solution raises more questions than answers about the future of maritime trade in the Strait of Hormuz. Can a system of fees and charges really mitigate the risks associated with passing through this conflict zone? Or will it simply become another layer of bureaucracy and cost for shipping companies to navigate?

The world will be watching closely as this crisis unfolds, and the fate of the Strait of Hormuz will have far-reaching implications for global trade and politics. The future of the Strait is no longer just about oil and gas – it’s about power, politics, and the willingness to pay a price for peace.