The US and Iran have entered a second round of peace talks as tensions escalate over the Strait of Hormuz, following renewed attacks on oil tankers and a US blockade of Iranian vessels.
- Iran proposes a $2 million toll per tanker for passage through the strait to fund reconstruction.
- Oil prices have surged from under $70 to record physical cargo highs of nearly $150 per barrel.
- The IMF warns that further escalation in the region could trigger a global recession.
At the center of the negotiations are curbs on Iran’s nuclear programme and the future of the narrow waterway, which has seen a de facto blockade by Tehran that has driven up global energy prices.
The Proposed “Tehran Tollbooth”
Within a 10-point peace plan, Iran has requested that it and Oman be permitted to charge a fee of up to $2 million on each vessel transiting the strait. Tehran suggests these funds would be used for national reconstruction.
The plan was trialled earlier this month, requiring tankers to provide details on cargo, destination, and ownership before paying a toll of at least $1 per barrel. For tankers carrying 2 million barrels, this totals $2 million, payable in cryptocurrency or Chinese yuan.
Under this system, Islamic Revolutionary Guard Corps (IRGC) boats would escort approved tankers through a narrow designated route near Iran’s southern coast. Ships from India, South Korea, Egypt, China, and Malaysia have already been allowed to pass, though it remains unclear if they paid the toll.
Legal Disputes and Sanctions
The proposed system opposes the UN convention on the law of the sea (Unclos), which grants vessels the right of unimpeded transit through international straits. While neither the US nor Iran has ratified Unclos, Washington disputes Iran’s right to control the waterway.
Furthermore, complex layers of sanctions imposed by the US and UK since the 1970s would prevent major Western shipping companies from legally making payments to the IRGC.
Impact on the Strait of Hormuz and Oil Markets
The de facto closure of the waterway, which previously handled 20 million barrels of oil and gas daily, has cut regional exports by approximately 10 million barrels per day. This disruption pushed Brent crude from below $70 a barrel last year to futures highs of $119 and physical cargo peaks of nearly $150.
Analysts suggest prices may remain around $100 a barrel for most of the year and into 2027. This is attributed to damaged infrastructure and the time required to reopen shut fields.
Beyond the toll, costs are expected to spiral as shipping companies charge higher rates due to attack risks and insurers increase premiums. Seafarers working in the designated hazardous area are also entitled to double pay.
Economic Motivations for Iran
The proposed fees would provide a lifeline to Iran’s crippled economy and allow the IRGC to rebuild its military. Control of the strait would also enable Tehran to resume oil exports, which have stopped due to the US blockade.
The economic crisis has seen an estimated 2 million Iranians lose their jobs. Additionally, the country’s information and communication technology minister stated that an internet blackout is costing the economy at least $35 million per day.
Global Economic Risks
Economists at the thinktank Bruegel estimate the global economy would barely notice the direct toll, as Gulf oil producers would likely shoulder 80% to 95% of the cost. This would result in a global price increase of only $0.05 to $0.40 per barrel.
However, the International Energy Agency has described the current disruption as the worst energy supply crisis in history. The IMF warned that further escalation could trigger a global recession, noting that the UK economy is expected to be more affected than other G7 nations.
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