The Strait of Hormuz is no longer just an oil route, it has the potential to become the most expensive “toll” in the history of world shipping. Trump has just announced a proposed fee that has shocked the shipping industry.
A Proposed Fee That Shocks Everyone
Trump has proposed a 20% refund on all cargo passing through the Strait of Hormuz. Based on the current oil price of around USD80 per barrel, this means that a full supertanker carrying 2 million barrels of oil could be charged a fee of up to USD30 million per trip.
This figure is much higher than what Iran itself has previously charged, which is around USD2 million per trip on an ad-hoc basis to guarantee safe passage.
Trump re-announced US sanctions on Iranian ships passing through Hormuz, and called the US the “GUARDIAN” of the route. According to him, on the basis of fairness, the US will receive a refund of 20% on all cargo sent.
Shipping Industry Stunned, No Further Explanation
The problem is that the White House has not provided any further details about the proposed fee, including how it would be administered or whether US allies in the Gulf were notified in advance.
Nearly a dozen people involved in the shipping market, including several whose tankers had just passed through Hormuz, said they had received no advance warning of the announcement. One ship captain, who declined to be named, described the fee as “highway robbery.”
The battle for control of the Strait of Hormuz is considered critical for both the US and Iran, especially after a fragile ceasefire collapsed. The strait normally carries nearly a fifth of the world’s oil and gas flows.
Iran’s Response & Its Impact on the Market
Interestingly, Iranian Foreign Minister Abbas Araghchi himself did not immediately reject the idea. He agreed in principle that anyone who guarantees safe passage for merchant ships should be compensated, but he thought the 20% rate was too high.
For financial markets, this kind of uncertainty, combined with the new fee whose implementation is unclear and the ongoing tension in Hormuz, is likely to trigger further volatility in global oil prices in the near term.
If the fee is actually implemented, global oil transportation costs will rise, which could indirectly weigh on the Ringgit through higher energy import costs for our country.
Key Takeaways
Trump has proposed a 20% fee on cargo in the Strait of Hormuz, equivalent to around USD30 million per full supertanker.
This figure is much higher than the USD2 million per trip that Iran has previously imposed on an ad-hoc basis.
The shipping industry was surprised by the announcement, as there were no further details about the implementation or negotiations with US allies.
Iranian Foreign Minister Abbas Araghchi agreed in principle with the concept of the fee, but objected to the 20% rate as too high.
The uncertainty over the implementation of the fee has the potential to increase oil price volatility and weigh on the Ringgit through energy import costs.
As long as the full details of this proposal are not clear, the market is expected to remain cautious, as a decision in Hormuz could now change global shipping costs in the blink of an eye.
