Tehran Turns World's Vital Oil Chokepoint Into Tollbooth

Iran has transformed the Strait of Hormuz into a state-run tollbooth, charging ships up to $2 million for safe passage through waters carrying one-fifth of global oil supplies. Gulf Cooperation Council Secretary-General Jasem al-Budaiwi told the United Nations Security Council on April 2 that Tehran has effectively closed the world's most critical shipping lane. Nations now face paying ransom or absorbing costs that ripple to gas pumps and grocery shelves worldwide.

"Iran has closed the Strait of Hormuz, prevented commercial vessels and oil tankers from transiting, and imposed conditions on some to pass through the Strait," al-Budaiwi stated in the first top-level public confirmation of Iran's toll system.

Iranian lawmaker Alaeddin Boroujerdi revealed on March 22 the mechanics of Tehran's new revenue scheme. Ships must pay up to $2 million for transit, with payments accepted in Chinese yuan or stablecoins to Islamic Revolutionary Guard Corps-linked intermediaries who vet cargo manifests, ownership structures and crew lists before issuing clearance codes. "Collecting $2 million as transit fees from some vessels crossing the strait reflects Iran's strength," Boroujerdi boasted on state television. He declared, "After 47 years, there is a new, de facto sovereign regime in the Strait of Hormuz."

The strategic waterway normally carries approximately 20 million barrels of oil daily, representing 20 percent of global liquid petroleum supply. Since the U.S.-Israel offensive began on Feb. 28, traffic has plummeted 90 to 95 percent. Only 6 percent of normal commercial shipping now transits the strait, which features just two 2-mile-wide navigable channels for inbound and outbound traffic.

Iran's parliament moved to formalize its toll system on March 30 when the National Security and Foreign Policy Committee approved legislation to impose transit fees. Final parliamentary approval is expected soon. Iranian Deputy Foreign Minister Kazem Gharibabadi claims the requirements "do not constitute restrictions" but are intended to "facilitate and ensure safe passage."

Maritime law experts say Tehran's actions violate international law. Iran signed but never ratified the UN Convention on the Law of the Sea, whose Article 38 designates straits like Hormuz for mandatory transit passage that coastal states cannot suspend. "Imposing transit fees is a violation of the rules of transit passage," states James Kraska, professor of international maritime law at the U.S. Naval War College. "There is no legal basis under international law for a coastal state to charge fees in an international strait like Hormuz."

The economic impact has rippled through global markets. War risk insurance premiums have jumped from fractions of a percent to between 3.5 and 10 percent of vessel value. Alternative pipelines from Saudi Arabia, the United Arab Emirates and Iraq can replace only about 9 million barrels daily, less than half the 20 million barrels that normally pass through Hormuz.

U.S. officials have condemned Iran's toll system as illegal economic warfare. Secretary of State Marco Rubio called the plan "illegal," "unacceptable," and "dangerous for the world" at the G7 meeting on March 27. Treasury Secretary Scott Bessent stated on March 30 that the U.S. will "retake control of the straits" through escorts or multinational operations. "Over time, the US is going to retake control of the straits, and there will be freedom of navigation, whether it is through US escorts or a multinational escort," Bessent told Fox News.

If fully operational at a reported fee of $2 million per tanker, the tolls could generate approximately $600 million monthly from oil alone and $800 million monthly including liquefied natural gas. Lloyd's List reports at least two vessels have confirmed paying fees, with ships from Malaysia, China, Egypt, South Korea and India reportedly receiving approval for passage.

The IRGC-linked vetting process requires ship operators to submit ownership structures, shipping documents, cargo manifests, destinations, crew lists and automatic identification system data. After approval, vessels receive permit codes and must detour north, hugging the Iranian coast around Larak Island in what industry analysts call the "Iranian tollgate." IRGC patrol boats escort approved vessels through the strait.

Richard Meade, editor-in-chief of shipping publication Lloyd's List, notes, "This is happening. And I suspect it's going to happen slightly more frequently if we don't see some progress in terms of the negotiations." Jason Chuah, professor of maritime law at City University of London, argues that while Iran claims sovereignty over the area, "stopping all commercial traffic or charging transit fees exceeds the bounds of self-defence and becomes illegal economic warfare."

The geopolitical stakes represent a fundamental challenge to free-market principles, with an authoritarian state effectively privatizing a global commons through military coercion. As Sultan al-Jaber, CEO of Abu Dhabi National Oil Company, puts it: "When Iran holds Hormuz hostage, every nation pays the ransom at the gas pump, at the grocery store, at the pharmacy." Nations now face the choice between paying Tehran's ransom or absorbing massive economic costs that ripple through every consumer market worldwide.