America’s 20% Hormuz Toll: When the Winner of a War Prices the Freedom of the Seas

Iran re-closed the Strait of Hormuz, and the US declared itself the strait's 'guardian' with a 20 percent toll on all cargo. Why passage through international straits was free, and what changes once the guardian starts charging.

Key Points

・On July 12, 2026, Iran’s IRGC navy declared it was re-closing the Strait of Hormuz “until further notice.” The next day, President Trump proclaimed the United States the “guardian of the Strait of Hormuz,” announced a 20 percent toll on all cargo transiting the strait, and said US forces would resume enforcing a maritime blockade of Iranian ports from the night of July 14 (UTC).

・Free passage through international straits has been a foundational postwar principle: under the UN Convention on the Law of the Sea, transit requires neither a coastal state’s permission nor payment. The IMO said a mandatory Hormuz toll has “no legal basis,” and 169 years ago the United States itself helped buy out Denmark’s centuries-old Sound Dues to abolish strait tolls for good.

・Iran, which is enforcing the blockade, and the United States, which claims to be guarding the strait, hold opposite positions but are converging on the same outcome: a sea that requires someone’s permission and a price. The US is winning the tactical fight, but the moment it tries to cash in that win, it risks spending down a different asset: its credibility as the guardian of a free maritime order.

News

Iran’s IRGC navy announced on July 12 that it was closing the Strait of Hormuz “until further notice,” reportedly citing “an end to US interference in the region” as a condition for reopening it. The night before, at around 11pm UTC on July 11, the Cyprus-flagged container ship GFS Galaxy was hit near the stern while transiting the strait eastbound, leaving it disabled; one Indian crew member among the 24 aboard was killed. The IRGC reportedly said it was responding to a vessel that used an unauthorized route and ignored warnings to change course. US Central Command attributed the attack to the IRGC and condemned it as a strike on a merchant ship “lawfully transiting an international waterway.”

That attack followed three nights of US airstrikes from July 7 to 11 that reportedly hit more than 300 targets, including Iranian air-defense systems, coastal surveillance networks, anti-ship missiles, and IRGC naval vessels and fast boats. CENTCOM described the strikes as intended to “degrade Iran’s ability to attack merchant ships freely transiting the strait.” Iran retaliated with missile and drone strikes on US bases in Bahrain and Kuwait, and the Islamabad Memorandum, the interim US-Iran arrangement signed June 17, collapsed just three weeks after it was signed.

On July 13, Trump wrote on social media that the United States would “from now on be known as the guardian of the Strait of Hormuz” and that, “as a matter of fairness,” it would be “reimbursed at a rate of 20 percent on all cargo transported” to cover the cost of providing security in “this extremely volatile region.” He simultaneously announced the resumption of the naval blockade on Iranian ports, and CENTCOM said it would begin enforcing a blockade of Iran’s entire coastline, ports, and oil terminals, regardless of flag, from 8pm UTC on July 14. Ships bound for destinations other than Iran are not to be impeded from transiting the strait. It remains unspecified whether the 20 percent would apply to cargo value or freight cost, or who would collect it.

IMO Secretary-General Arsenio Domínguez said the organization has “consistently and firmly opposed charging for passage through straits used for international navigation,” adding that “no legal basis exists for imposing a mandatory toll simply for transiting a strait.” Brent crude jumped roughly 9 percent on July 13 and touched around $86 a barrel on July 14. Ship-tracking data reportedly showed only six merchant vessels confirmed transiting Hormuz on July 13, the lowest count since the crisis began. Attention has now shifted to whether the announced “security fee” becomes an actual policy, and how transit might resume through a strait now subject to two overlapping blockades.

Background

The war has already produced one blockade before this one. The current closure is the latest chapter in a conflict that began on February 28, when the US and Israel launched Operation Epic Fury, a large-scale campaign against Iran’s military and nuclear infrastructure; Supreme Leader Khamenei was reportedly killed in the opening strikes. Iran declared its first closure of the strait on March 4, causing ship insurers to stop underwriting voyages and commercial transit to collapse. From late March, Iran began granting passage to vessels from “friendly” states: China, Russia, India, and Pakistan. An April 8 ceasefire was followed, on April 13, by the US Navy launching its own blockade of Iranian ports, producing a “double blockade”: Iran closing the strait, the US closing Iran’s harbors. On June 17, Pakistan brokered the Islamabad Memorandum, reportedly a framework extending the ceasefire 60 days, committing to safe strait transit, and suspending oil-export sanctions. Attacks on merchant ships resumed near Hormuz between July 6 and 8, unraveling that framework, and the current sequence of strikes and closures followed.

Iran’s own leadership has been unsettled throughout. The Assembly of Experts reportedly selected Khamenei’s son, Mojtaba, as successor, though analysts say real authority is now dispersed across an IRGC-centered collective leadership. President Pezeshkian signed the Islamabad Memorandum, but it is the IRGC that holds the trigger at the strait. That gap between who signs and who shoots resurfaces later in this piece.

Free transit through international straits is a deliberately un-priced right. The UN Convention on the Law of the Sea guarantees “transit passage” for all vessels through straits used for international navigation, and bars coastal states from suspending it (Article 44). Charges tied to mere passage through territorial waters are likewise prohibited; only payment for specific services rendered, such as pilotage, is permitted (Article 26). The Strait of Hormuz narrows to about 33 kilometers at its tightest point, and the traffic separation scheme actually used by large vessels, both inbound and outbound, runs entirely through Omani territorial waters.

It may seem inconsistent that the Suez and Panama canals charge tolls. But canals are engineered waterways, and tolls there have long been accepted as payment for construction and upkeep. Natural straits are treated as the opposite case: a state does not get to charge passersby simply because geography placed it alongside a shipping lane, a principle written directly into the treaty.

That principle has a precedent in which a toll was deliberately dismantled. Denmark charged the Sound Dues on ships passing through the Øresund, the entrance to the Baltic, from 1429 onward; at its peak it was worth two-thirds of the kingdom’s revenue. In 1857, after 428 years, the toll was abolished when a group of nations pooled a lump-sum payment to buy out free passage in perpetuity. The United States joined that buyout the same year, through a separate bilateral treaty with Denmark.

Ships stop even when no warship physically blocks them. What has actually shut down the strait through this crisis has been less mines and warships than the disappearance of insurance and permission. When Iran first declared a closure in March, no lane was physically sealed, but commercial transit collapsed the moment insurers stopped underwriting voyages. The same pattern played out this time: the IRGC’s declaration, the attacks on merchant ships, and the US airstrikes all pushed insurance risk higher, and transit was already thinning before the formal closure was announced.

Nor has the closure been uniform. Since March, Iran has granted passage to ships from “friendly” states such as China, Russia, India, and Pakistan, meaning the vessels actually stopped have mostly been Western-linked, and the arrangement functions less as a blockade than as a system that makes Iranian approval a condition of transit. The US blockade, for its part, targets only ships entering or leaving Iranian ports and claims not to impede transit through the strait itself. Each side can insist “the strait is open,” even as the version of the sea that required no one’s permission has effectively disappeared.

Alternatives are limited. The Strait of Hormuz carried an average of roughly 20 million barrels of oil a day in 2024, about a fifth of global oil consumption and roughly a fifth of global LNG trade. The US Energy Information Administration estimates that spare capacity on the pipelines that bypass the strait, Saudi Arabia’s East-West pipeline and the UAE’s line to Fujairah, totals only about 2.6 million barrels a day combined. Against 20 million barrels a day of throughput, only a little over a tenth of that flow could be rerouted.

Analysis

The memorandum did not stop the violence; it gave the violence a vocabulary

Within three weeks of being signed, the Islamabad Memorandum stopped functioning as a mechanism for peace and became instead a shared vocabulary each side uses to justify its own use of force. The IRGC describes its attacks on merchant ships as responses to vessels using unauthorized routes or ignoring warnings; CENTCOM describes its airstrikes as a response to Iran being “given a chance to honor the memorandum” and failing again. Both sides say the other broke it first. The document exists now to be cited, not observed.

The line first crossed, however, is unambiguous: attacking merchant ships. An Indian crew member died aboard GFS Galaxy, and sailors have died aboard multiple vessels over the course of this crisis. Transit passage is a right the treaty says cannot be suspended, and an armed state actor targeting civilian seafarers does not fit into any vocabulary of retaliation, regardless of the surrounding context.

Even so, Iran’s actions follow a logic internal to the regime. Having lost air superiority, had its leadership killed, and seen its nuclear sites destroyed, the “approval right” over the strait is one of the few cards Tehran has left. Sustaining a blockade that sacrifices its own oil exports makes sense in a framework where having little left to lose becomes leverage in itself. The exemptions granted to friendly states keep the closure confined to the West, avoiding a wider break with the non-Western world. And one more unresolved question was built into the memorandum from the start: whose signature actually binds Iran: Pezeshkian’s, or the IRGC’s, whose hand is on the trigger at the strait. An agreement where it is unclear whose signature is binding tends to get filed away as “a difference in interpretation” once it is broken.

User-pays logic has a real argument behind it, and a second legal wall in front of it

There is a case to be made for “we protect it, so you pay for it.” Hormuz’s security has for decades been supplied through the US Navy’s presence, funded by American taxpayers, with the benefit flowing largely to oil buyers. Japan, the ally most exposed to this closure, depends on the Middle East for roughly 95 percent of its crude imports, nearly all of it moving through this strait. Since the crisis began, Japan has been releasing oil from its national reserves while keeping its stockpile at roughly 200 days of supply, and has capped gasoline prices at 169.9 yen per liter (as of July 6) through subsidies; Japan’s Ministry of Economy, Trade and Industry has said the unsubsidized price would otherwise be around 206 yen. The bill for a broken strait has already reached Japanese households, in the form of taxes and drawn-down reserves.

That said, the ledger is not purely one-sided. Gulf states pay through hosting US bases and buying US weapons; Japan pays through its share of stationing costs and through Self-Defense Force intelligence-gathering activity in the Middle East that has continued since 2020. The US Navy’s presence itself also underwrites the dollar and the trade networks that serve America’s own interests. Benefit and burden have always been entangled here, and treating this as one-sided free-riding oversimplifies the picture.

But before the argument over legitimacy even begins, there is a legal wall. UNCLOS does not permit charges based on passage alone, and the IMO’s Secretary-General has said flatly that no legal basis exists. Secretary of State Rubio himself reportedly said previously that “no country is permitted to impose tolls or fees on international waterways.” This is the second time this year that a unilateral presidential charge has hit a wall: in February, the Supreme Court ruled 6-3 that IEEPA “does not grant the president authority to impose tariffs,” striking down the administration’s tariff regime. The pattern of bypassing Congress and treaty procedure to declare a charge on grounds of “fairness” keeps running into lines drawn elsewhere: by courts at home, by international bodies at sea. The US has not ratified UNCLOS itself, so the treaty does not directly bind it, but freedom of transit passage is a principle Washington has itself invoked as customary international law across the world’s oceans. Declaring a toll carves out a US-only exception to a principle the US helped build.

The weight of precedent remains real regardless. The Strait of Malacca, Bab-el-Mandeb, the Turkish Straits: global trade runs through narrow waterways much like Hormuz. When a coastal state, or an outside power, says “we’ll protect it, so pay us,” the world still has no shared answer for how to say no. In 1857, when the Sound Dues were abolished, the United States stood on the side of that principle. If this toll becomes policy, the country that helped write the principle would be the one to bury it again.

The US is winning the tactical fight, and that is exactly why it wants to monetize the win

Tallied item by item across four and a half months of war, the balance of military objectives heavily favors the US and Israel. The opening strike hit Iran’s leadership, including Khamenei; the Fordow enrichment site is assessed to have lost functional capacity, though assessments of the setback’s duration diverge sharply: Israeli officials say more than two years, US intelligence says nine to twelve months with no major change. The three nights of strikes in July directly hit the anti-ship missiles and fast boats the IRGC has used to attack merchant ships, and the port blockade has nearly sealed off Iran’s oil exports; China, the largest buyer of that oil, has reportedly seen its imports roughly cut in half. Measured against the narrow goal of degrading Iran’s ability to threaten shipping, the campaign is largely achieving what it set out to do.

Two threads explain why the side that is winning would float a toll now. One is domestic politics: being able to say the cost of a long military campaign will be shared with allies answers to intervention fatigue at home, importing the burden-sharing language of NATO’s 2 percent debate into maritime security. The other is negotiating tactics: opening with a high initial demand, leaving implementation details unspecified, and waiting for the other side to make concessions is a pattern that recurred throughout this administration’s tariff negotiations. Whether 20 percent is a genuine policy design or a card meant to extract other concessions from Gulf states and shippers is not yet clear. Either way, the rewriting of the premise that maritime security is free has already begun the moment it was declared. Military dominance eventually fades; a precedent for billing, once established, does not.

That scoreboard also carries interest. Members of Iran’s parliament have reportedly floated reconsidering the country’s nuclear doctrine if a full-scale attack resumes, and Iran’s nuclear program is reportedly beginning to relocate to a deeper mountain facility beyond Fordow, referred to in English-language reporting as “Pickaxe Mountain.” Tactical victory has also produced an adversary that is more deeply hidden, and more cornered.

The winner’s invoice is addressed to its allies, not its adversary

If the 20 percent toll is implemented, the first to pay would not be Iran but America’s allies and neutral trading partners. The oil moving through the strait is owned by Saudi Arabia, the UAE, Kuwait, and Qatar, and bought by Japan, South Korea, India, and China. Iran has already cast its exemption net around friendly states, meaning the cargo most exposed to a US toll would largely be Western and Western-aligned. The guardian’s invoice lands on its allies, while its adversary’s friends protect each other’s customers through an exemption network of their own. That inversion is a more serious problem than the size of the fee.

Oman’s position deserves particular attention. The deep-water lane used by large vessels runs entirely through Omani territorial waters, which means a US toll also carries the appearance of a challenge to Omani sovereignty. Oman has reportedly drafted a mediation plan splitting the strait into two corridors: a southern corridor in Omani waters with prewar-style free passage, and a northern corridor in Iranian waters requiring Tehran’s prior approval. It is a plausible off-ramp from the current stalemate, but adopting it would also formally endorse a “permission-required sea” for part of the strait, a compromise meant to preserve the principle of free navigation that itself concedes part of that principle. That, too, is a measure of how hard an exit has become.

What is eroding underneath all of this is trust in the US-led order itself. The country that wrote the rules is declaring a charge outside them, while the country that broke the rules is selling exceptions to them. That contrast makes it easier for the non-Western world to conclude that dealing with China is, on balance, more predictable. This is not a rise in trust toward China so much as a fall in the thing it is being compared against: a change in relative pricing, not in China’s own conduct. China, for its part, is no unscathed beneficiary either, with its Iranian oil imports roughly halved and its refineries under sanction. Still, the contrast between a United States rewriting the rules and a China picking up practical gains in the gaps of those rules is steadily shifting calculations about which power is easier to plan around.

Conclusion

The Strait of Hormuz has closed twice in four and a half months, and each closure has left something behind that does not reset when the strait reopens: insurance premiums, detour costs, an approval network, and now a declared security fee. Iran closed the sea. The side that named itself its guardian was the first to openly put a price on the freedom to cross it. Hostile to each other as they are, both sides are writing in, from opposite directions, the same underlying premise: that passage now requires someone’s permission and someone’s price.

The strait will likely reopen at some point. It seems unlikely to go back to being free. And the world has more than one narrow waterway like Hormuz. The next time a similar bill arrives at one of them, the world will still not have rebuilt a shared principle for declining to pay it. In 1857, a group of nations pooled their money to buy back the freedom of the sea. When it comes time to buy that freedom back again, who pays, and to whom, is a question that will still be open after this strait reopens.

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