The escalation of the US-Israel war on Iran has thrust the world into uncharted geopolitical waters, transforming the Strait of Hormuz from a bustling artery of global commerce into a heavily militarised bargaining chip.
Before hostilities, the strait handled around 120–140 ships daily, carrying roughly 20 million barrels of oil—about one-fifth of global supply—as well as substantial LNG exports. As a result, it has become the centre of a high-stakes geopolitical standoff.
At the core of this conflict lies Iran’s effort to establish a de facto toll-based transit regime in the Strait of Hormuz. While Tehran presents this as an economic response to sanctions and war damage, it represents a bold attempt to convert control over a critical maritime chokepoint into sustained geopolitical leverage.
More fundamentally, the Hormuz crisis illustrates a broader transformation in contemporary geopolitics. Rather than relying solely on military denial, states increasingly seek to monetise strategic geography by converting control over critical infrastructure and chokepoints into recurring political and economic leverage. Accordingly, Iran’s proposed toll regime is less an isolated wartime expedient than part of a wider shift towards the weaponisation of connectivity, in which access itself becomes a strategic asset capable of generating both revenue and diplomatic influence.
The Economics of Asymmetrical Blockade
The crisis has generated severe economic consequences far beyond the Gulf. The closure of the strait costs an estimated $114.8 billion in lost oil revenues per day while leaving thousands of seafarers stranded in increasingly dangerous waters. In response to mounting sanctions and wartime financial pressure, Tehran has sought to transform the chokepoint into a source of strategic leverage through a de facto IRGC-administered toll regime.
Under this system, the IRGC mandates that vessel operators submit full documentation—including cargo manifests and ownership chains—and route their ships through a specific corridor near Larak Island under Iranian military escort. Transits are subject to clearance codes, and some vessels have already paid authorisation fees of up to $2 million, settled in yuan.
The brutal mathematics of maritime shipping makes Iran’s proposed toll-based transit policy surprisingly effective. As economists Mohammad Reza Farzanegan and Nader Habibi both note, paying a $2 million toll to Tehran is strictly cheaper for shipping companies than absorbing the astronomical costs of a continuous blockade, which include bleeding money on crew wages, loan repayments, and inflated war-risk premiums for tankers sitting idle. However, engaging with this toll system is fraught with immense legal and political peril. Because the IRGC is designated as a Foreign Terrorist Organisation (FTO) by the United States, paying these tolls risks triggering severe civil and criminal penalties under US, UK, and EU sanctions.
A Heterodox Assault on Maritime Law
Iran justifies its proposed $40 billion annual toll scheme by citing fee structures in the Bosphorus Strait, the Straits of Malacca, and the Suez Canal. Yet this comparison sits uneasily with international maritime law. Unlike the artificial Suez Canal or the Panama Canal, the Strait of Hormuz operates under the United Nations Convention on the Law of the Sea (UNCLOS) transit passage regime, which dictates that vessels must be allowed continuous and expeditious passage through natural straits used for international navigation.
As legal experts like Sanjeet Ruhal point out, coastal states such as Iran and Oman can adopt limited laws on safety or pollution, but they cannot legally impose general transit taxes or convert the strait into a permission-based corridor.
Moreover, Türkiye derives revenue from services such as pilotage and towage rather than from charging vessels simply for transit. Comparisons with Iran’s proposed toll regime are therefore legally and functionally misleading. By contrast, Iranian officials, such as Deputy Foreign Minister Kazem Gharibabadi, argue that the current “state of war” suspends standard legal frameworks.
The significance, therefore, extends beyond the immediate legality of Iran’s proposal. If a coercively negotiated toll arrangement were to gain even limited international acceptance, it could establish a precedent whereby exceptional wartime measures gradually evolve into recognised peacetime practices. Such incremental shifts have historically played an important role in the development of international norms, making Hormuz not merely a regional dispute but also a potential test case for the future governance of strategic maritime chokepoints.
Diplomatic Standoffs and Regional Fractures
This legal friction has triggered acute diplomatic standoffs, placing Oman—a long-standing US treaty partner since 1833—at the centre of a difficult balancing act. Seeking to preserve freedom of navigation without openly confronting Tehran, Muscat proposed a joint protocol modelled on the Strait of Malacca under which vessels would pay voluntary service fees to support navigational safety rather than mandatory transit tolls. Iran, however, has shown little enthusiasm for such an approach. Instead, Tehran appears intent on establishing a more formal toll-based transit arrangement, while also exploring cooperation with Oman to lend the initiative greater regional legitimacy and make it more acceptable to key partners, particularly China, by providing more predictable transit.
The prospect of Omani cooperation nevertheless triggered a sharp response from Washington. Rejecting any form of toll regime in international waters, President Donald Trump warned Muscat against facilitating Iran’s proposal. The diplomatic dispute quickly merged with the military escalation that followed the collapse of the 60-day ceasefire. After accusing Iran of targeting commercial shipping, the United States launched successive airstrikes against Iranian military infrastructure, prompting IRGC retaliation against US bases across the Gulf. Trump consequently declared the ceasefire “over” and peace talks a “waste of time” at the NATO summit in Ankara.What began as a dispute over maritime transit therefore rapidly evolved into a broader regional confrontation, illustrating how competing visions of access and governance in Hormuz have become inseparable from the wider geopolitical contest.
Future Perspectives: The Reshaping of the Global Order
Looking ahead, assessments from strategic experts suggest that the crisis in the Strait of Hormuz could have lasting structural consequences for global security, trade, and the governance of maritime chokepoints. Reza Khanzadeh, a professor of Middle East politics, argues that Iran’s proposed toll-based transit regime should be understood not merely as a wartime tactic, but as a potential attempt to establish a broader legal and strategic precedent. If such an arrangement were accepted under coercive conditions, other states or allied actors might seek to employ similar strategies in contested waterways, including the South China Sea.
The implications for international maritime law are also significant. Sanjeet Ruhal notes that allowing selective access or toll-based transit arrangements in Hormuz could weaken the foundational principles governing freedom of navigation and transit. If the international community were to accept such measures to avoid military escalation, the governance of key sea lanes could shift from a rules-based framework to one increasingly shaped by strategic leverage and power asymmetries.
At the regional level, economist Mohammad Reza Farzanegan argues that longer-term stability may ultimately require a regional maritime authority involving Iran, Oman, Qatar, and the UAE to coordinate navigational safety and broader governance of the strait.
However, Iranian American economist Nader Habibi cautions that such a framework would face substantial geopolitical obstacles. Any meaningful regional integration of this kind would likely require the approval, coordination, or at least tacit support of major external powers, particularly the United States and China. Given the current trajectory of US-Iran tensions and broader strategic competition, achieving such a consensus remains uncertain and potentially distant.
Conclusion
The crisis in the Strait of Hormuz has evolved beyond a localised theatre of the US-Israel conflict with Iran. It has become a test of how strategic maritime chokepoints can be transformed into instruments of economic and political leverage during conflict. Iran’s proposed toll-based transit regime reflects not only the pressures of sanctions and war but also a broader effort to convert geographic advantage into sustained geopolitical influence.
The implications extend well beyond the immediate crisis. Were such a system to become institutionalised, it could reshape understandings of freedom of navigation, weaken established norms governing transit passage, and encourage other states to exploit strategic geography in similar ways. Even proposals such as President Donald Trump’s suggestion that the United States act as a “Guardian of the Strait of Hormuz,” in exchange for a 20 per cent fee on cargo transiting the waterway, illustrate a broader shift in strategic thinking: access to critical maritime corridors is increasingly viewed as both a security responsibility and a source of economic leverage, regardless of whether such arrangements prove politically feasible.
More fundamentally, the Hormuz episode suggests that 21st-century geopolitical competition is increasingly centred not on territorial conquest but on the governance of access. Strategic advantage derives less from controlling territory than from regulating the movement of energy, commodities, data, and capital through critical corridors. In this sense, Hormuz represents not merely a regional security crisis but an early illustration of how control over connectivity may become one of the defining currencies of power in an increasingly fragmented international order.
Ultimately, the international community’s response will determine whether access to critical sea lanes continues to be governed primarily by established legal norms or increasingly by the strategic leverage of states controlling key chokepoints. The debate over Hormuz tolls is therefore about far more than wartime revenue; it is about the future balance between sovereign leverage and a stable, rules-based maritime order.
