The toll booth at the edge of the world

The Strait of Hormuz is 24 miles wide and carries a fifth of the world's oil, a fifth of its liquefied natural gas, and plenty of fertilizer to serve hundreds of millions of people. The Strait of Hormuz has always been called a chokepoint. And for obvious reasons. In the spring of 2026, Iran began turning it into a toll booth.

This is not a wartime disruption. It is an attempt to restructure global maritime access, the most significant such move since Egypt nationalized the Suez Canal in 1956. Iran seized control through force rather than law, but the logic is the same: a country squeezed out of the international economy understood that geography is the one asset sanctions cannot touch.

Working in Yemen and Djibouti for almost ten years through 2015, advising governments on both sides of the Bab-el-Mandeb, the pattern was clear: Iran and its proxies in Yemen were systematically mapping the pressure points of global maritime trade and building the capacity to exploit them. The Houthi campaign in the Red Sea was a manifestation of that strategy. The Hormuz toll booth is another, larger and potentially more impactful.

1. The architecture of a chokehold

The Strait of Hormuz lies between Iran's northern coast and the Musandam Peninsula, shared by Oman and the UAE. It is the only exit from the Persian Gulf. Unlike the Suez Canal, which can be bypassed around the Cape of Good Hope, or the Malacca Strait, which has partial alternatives, Hormuz has none.

In 2024, roughly 20 million barrels per day of oil moved through the strait, representing 27% of all global maritime oil trade. Of that, 84% went to Asian markets. China sourced a third of its total oil supply here. Japan drew approximately 95% of its crude from the Gulf region; South Korea, around 75%. Qatar's LNG exports, roughly 20% of global LNG trade, go exclusively through Hormuz. The strait also carries a major share of global urea fertilizer from Gulf producers.

Bypass capacity: Saudi Arabia and the UAE have combined pipeline bypass capacity of about 2.6 million barrels per day, 13% of the strait's normal flow. Qatar, Kuwait, and Bahrain have no bypass.

Iran's leverage derives from geography and four decades of preparation. Its territorial waters extend into the strait. Its coastline stretches nearly 1,000 miles, lined with mobile anti-ship missile batteries that can relocate before a retaliatory strike. The IRGC Navy holds over 5,000 mines deployable by fast boat. The U.S. Navy currently has no minesweepers in the region.

“It is described as a chokepoint for a good reason. You could argue this is a uniquely challenging one, because there are no alternatives.” — Nick Childs, Senior Fellow, International Institute for Strategic Studies

2. The toll booth emerges

For forty years, Iran's threat to close the strait was treated as a bluff, on the assumption that Tehran would be blocking its own exports. That theory assumed Iran would always have too much at stake. When the United States and Israel attacked Iran on February 28, 2026, killing Supreme Leader Khamenei and dismantling much of Iran's conventional military infrastructure, the plans changed. Iran did what it had always said it would do.

The IRGC issued VHF radio warnings prohibiting vessel passage within hours of the military attacks . By mid-March, Windward AI reported traffic had reached near collapse: 16 AIS-visible crossings in a single week, against a historical average of 138 vessels per day. Between March 1 and March 25, 142 transits took place. In the same period in 2025, there were 2,652. At the beginning of April, according to S&P Global Market Intelligence, transit are down 95%. About 5 tankers passed through Hormuz every day in March, compared to 140 daily in Feb (WSJ).

Iran is not simply closing the strait. It is trying to build a money making system. Since mid-March, the IRGC has rerouted vessels through Iranian territorial waters between the islands of Qeshm and Larak. To use the this, operators contact IRGC intermediaries, submit the vessel's IMO number, cargo manifest, crew list, and destination, and wait for a clearance code. Simple right? Ships that receive clearance are escorted by IRGC vessels. Ships that don’t get the code are turned back.

3. The $2 million question

Lloyd's List Intelligence confirmed that at least two vessels paid tolls in March. Iranian lawmaker Alaeddin Boroujerdi announced the figure on state television: 'Collecting $2 million as transit fees from some vessels crossing the strait reflects Iran's strength.' A colleague framed it as routine governance: 'We ensure its security, and it is natural that ships and tankers should pay such fees.'

The math is pretty straightforward. Under normal conditions, roughly 10 Very Large Crude Carriers pass through per day. At $2 million per vessel, that is $20 million per day, or around $600 million per month from oil alone. Add LNG and other cargo and the figure exceeds $800 million per month, comparable to Egypt's peak Suez Canal revenues and equivalent to 15-20% of Iran's total monthly oil export revenue in 2024.

4. The Suez comparison

Iran has deliberately invoked Egypt's Suez model, and the comparison is credible. The Suez Canal earned Egypt $700–800 million per month in a typical year before Red Sea disruptions hit revenues. Egypt owns the canal outright, nationalized it from British and French shareholders in 1956, and has collected internationally recognized tolls for seven decades under the Suez Canal Authority. That is where the comparison ends. Britain in 1956 was already feeling the pressure after the Second World War. The crisis made it clear that the country was no longer the leading power in the Middle East. Instead, the United States stepped into that role. London realized it could no longer pursue its global ambitions without American support, and both friends and rivals began to see British power in a different light. The situation also showed how financially vulnerable Britain had become, as pressure from the US led to a run on the pound, speeding up its decline as a major world currency and pushing the country further toward the end of its empire.

Empires tend to decline when their military power stretches beyond their political strategy, when their economic base starts to weaken, and when the people they want to control hold out long enough to outlast them. The United States is not in that position.

Iran is attempting the same outcome through different means. Where Egypt operates a transparent, treaty-compliant toll agency, Iran is using the IRGC, a sanctioned paramilitary force, to collect informal fees in Chinese yuan, with no legal framework and no recourse for operators who refuse to pay.

The legal gap matters less than it appears. UNCLOS guarantees transit passage through international straits, but Iran never ratified UNCLOS. Neither did the United States. The UN Security Council will not act given Russian and Chinese vetoes. The IMO has no enforcement capacity. International law cannot compel a state that is willing to enforce its position with drones and missiles.

5.  The Houthi precedent

Having spent years in Yemen and Djibouti, I watched Iran and the Houthis develop this playbook from close range. By 2015 the pattern was already evident: systematic pressure on chokepoints, coercion, and the extraction of payment from those who wanted to pass unmolested. The Bab-el-Mandeb came first. Hormuz was always the larger prize.

A UN Security Council report later alleged that the Houthis charged shipping agencies safe-passage fees of approximately $180 million per month during their Red Sea campaign. The Houthis denied it. But the model was in place: a proxy force with territorial control over a waterway, collecting tribute in exchange for safe passage. Iran has now applied the same model at state level, in a chokepoint that carries twice the economic weight.

The precedent problem extends beyond Iran. If a state can impose tolls on an international strait through military coercion and have those payments made, the template exists for every other strategic waterway. Indonesia and Malaysia at the Malacca Strait. Turkey at the Bosphorus. The international norm of free passage, which the U.S. Navy has enforced for eighty years, does not survive on principle alone.

Blocking Bab-El Mendeb and therefore the Suez Canal, creates another longer term advantage for Iran and Turkey.  As early as 2021 Iran proposesd alternative transport route to Suez Canal consisting of a north-south trade corridor connecting India with Russia passing through Iran.  It is claimed that the proposed transport line "shortens time" and "save costs by 30 percent” compared to the Suez Canal (Kazem Jalali, Iranian Ambassador to Russia 2021).  Furthermore, Turkey is developing the Zangezur Corridor to ensure East-West trade flows consisting of a strategic transportation route connecting Azerbaijan to Türkiye, which appears set to become operational within four to five years. The US will have a less visible role in guaranteeing the smooth operation of these land corridors.  

6. Iran's strategic calculus

Iran is the second most sanctioned country in the world. It cannot sell oil freely, access global banking, or participate in most international markets. The toll booth addresses that directly. It cannot be sanctioned out of existence because the mechanism is geographic. Blocking the strait, or threatening to, is something no external pressure can remove.

The passage policy is discriminatory by design. Could it work? China, Russia, India, Iraq, and Pakistan receive preferential access. American and Israeli-linked ships are not allowed to pass for now. This is not random. Iran is seeking to build a patronage structure organized around the world's most valuable waterway, rewarding allies and punishing adversaries with the same instrument.

7. The limits of military power

The United States has prepared for this scenario for decades. The preparation has proven challening, and the reason is asymmetry. Iran does not need to defeat the U.S. Navy. It only needs to make transit risky enough that insurance becomes unaffordable. A drone that damages a tanker without sinking it can stop shipping as effectively as a missile strike. By early March, war-risk premiums had risen four to six times above pre-war rates. The economic deterrent was in place before military options could be applied.

Iran's 1,000-mile coastline provides depth for mobile missile systems that cannot be reliably neutralized from the air. Over 5,000 naval mines can be deployed quickly by fast boat. The U.S. has no minesweepers in the theater. Escorting the historical volume of traffic through the strait, 138 vessels per day, (for instance) across 1,000 miles of hostile coastline against asymmetric attack is not operationally feasible at acceptable cost.

President Trump threatened to strike Iranian power plants, then postponed. He announced naval escorts for tankers, then ran into the logistics. The administration is correct that reopening the strait by force is possible. The question is the cost and the duration, and neither answer is easy.

8.  A timeline of escalation

The current situation did not arrive without warning. Each step built on the last.

1984–1988 — The tanker war

Both sides attacked shipping during the Iran-Iraq War. Over 500 vessels were damaged or destroyed. Iran mined the strait and nearly sank USS Samuel B. Roberts. The U.S. Navy escorted re-flagged Kuwaiti tankers. The framework for coercive maritime pressure was established.

2019 — Tanker seizures

Iran seized the British-flagged Stena Impero in response to the UK detaining an Iranian tanker off Gibraltar. The IRGC demonstrated a precise, repeatable seizure capability and the willingness to use commercial ships as bargaining pieces.

January 2024 — St. Nikolas seized

IRGC forces rappelled from a helicopter onto the St. Nikolas tanker, claiming retaliation for U.S. sanctions enforcement. The operation was practiced and intentionally public.

April 2024 — MSC Aries seized

The Iranian Navy seized the Portuguese-flagged MSC Aries in the Gulf of Oman with 25 crew aboard. A major commercial vessel taken in daylight, marking a clear escalation in operational willingness.

February 28, 2026 — War begins

U.S. and Israeli strikes on Iran, including the killing of Supreme Leader Khamenei. The IRGC begins issuing VHF warnings prohibiting passage through the strait within hours.

March 2, 2026 — Closure declared

Senior IRGC official confirms the strait is closed. No tankers broadcast AIS signals. War-risk insurance is withdrawn, making transit economically unviable for most operators.

March 13, 2026 — Toll booth opens

IRGC establishes the Larak Island corridor. Lloyd's List tracks 26 ships using the toll route. At least two confirmed payments of $2 million each. Parliament begins drafting formal toll legislation.

March 28, 2026 — Sovereignty demand

Iran formally demands recognition of its sovereignty over the Strait of Hormuz as a condition for ending the war. The demand was not on the table in previous negotiations.

Conclusion: The new geography of power

Iran has discovered, or confirmed, that geography is more durable than any other form of leverage. The question is whether it can convert a wartime position into a permanent institution.

Egypt's nationalization of the Suez Canal is the instructive case. Nasser succeeded not because he had military superiority, Britain and France invaded, but because the United States refused to support the invasion, and the fait accompli held. Iran needs a comparable political outcome: either a negotiated settlement that acknowledges its control, or a U.S. failure to reopen the strait at acceptable cost.

Neither outcome is impossible. Payments have already been made. The toll booth exists even though it is informal. Parliament is drafting the legislation. The IRGC commander who built the system was killed by an Israeli airstrike, but Iran has spent forty years preparing for decentralized command precisely because it expected its commanders to be targeted.

What is being tested is whether the post-1945 principle of free navigation through international straits, enforced by U.S. naval power for eight decades, can survive contact with a state willing to hold a fifth of global oil supply hostage. If it cannot, every nation with coastline next to a strategic waterway has just received a signal that will take years to fully absorb.