With recent headlines about a potential deal between the US and Iran, shipowners are closely monitoring how Iran's plan to charge ships for passing through the Strait of Hormuz may affect shipping costs and alternative...
With recent headlines about a potential deal between the US and Iran, shipowners are closely monitoring how Iran's plan to charge ships for passing through the Strait of Hormuz may affect shipping costs and alternative routes.
According to Paul Morgan from gCaptain, the current fee levels for passing through the Strait make it cheaper for supertankers to take a longer route around Africa.
On February 28, 2026, airstrikes from the US and Israel on Iran resulted in the closure of the Strait of Hormuz, a critical oil supply route. Within a day, traffic in this vital corridor dropped by 80%. By the end of the week, around 750 ships were stranded on either side with a total of $15.3 billion worth of oil and gas onboard, leaving 11,000 seafarers stuck without a clear exit plan.
Four months later, a peace agreement known as the Islamabad Declaration is expected to be ratified in Geneva on June 19, 2026, with hopes that the strait will reopen within 30 days. However, the agreement includes a provision for Iran and Oman to jointly manage maritime services in the strait, indicating that Iran may impose fees on passing ships, which shipowners might find hard to ignore.
Iranian officials have expressed their intentions regarding this. A member of Iran's parliamentary infrastructure commission mentioned in March 2026, “War has costs; naturally, we must take transit fees from ships passing through the Strait of Hormuz.” Reports suggest that at least two vessels paid around $2 million each for transit during the conflict, framed as fees for special navigational, security, and environmental services. A new Iranian body, the Persian Gulf Strait Authority, began requiring vessels to secure permits for transit, and those without them were turned back.
In response, five Gulf Cooperation Council states formally notified the International Maritime Organisation, advising shipping companies against compliance with Iran’s requirements. The legality of Iran’s stance is contested; under UNCLOS, a coastal state can charge for specific services provided to a vessel but cannot impose a general toll for the right of passage through an international strait. Although this principle is clear in theory, enforcing it realistically is challenging, especially since the Islamabad Declaration has traded away military leverage for a ceasefire.
The real issue is highlighted by the insurance figures. Before the crisis, the added war risk premium for Gulf tanker journeys was about 0.1% of the hull and machinery value, a negligible cost. By March 2026, this spike rose to 2.5% of hull value every week, with some stranded tankers paying as much as 10% for just one transit. Reports indicated that seeking war risk cover for a five-year-old VLCC trying to exit the Gulf amid the crisis ranged from $10 million to $14 million.
Most protection and indemnity (P&I) clubs, which cover 90% of the global merchant fleet, withdrew war risk coverage within 72 hours of the conflict’s onset. JPMorgan estimated that about 329 vessels in the Persian Gulf needed hull and liability coverage, totaling an insurance exposure of approximately $352 billion that the private market ceased to offer. The US International Development Finance Corporation stepped in with a $20 billion maritime reinsurance plan, indicating the scale of the private market’s withdrawal.
Even now, a post-ceasefire premium of around 1% of a modern VLCC's hull value translates to $1.1 million per transit. Just a few months prior, this cost was around $110,000 to $165,000. This newly established pricing is expected to last, as the Lloyd’s Joint War Committee has expanded its high-risk designation to the entire Persian Gulf, a classification that typically takes years to change.
When factoring in the Iranian service fee, the situation becomes even more concerning. A VLCC typically carries about 2 million barrels of crude oil, and a wartime fee of $2 million per vessel effectively translates to $1.00 per barrel. When combined with the current war risk premium in Gulf trading, routing a supertanker around Africa starts to look appealing, despite adding 12 to 18 days to a Gulf-Europe journey and incurring an extra $1 million to $2 million in fuel and hiring costs.
It's crucial to note that the Cape of Good Hope is not a substitute for the Strait of Hormuz for vessels loading in the Gulf; all tankers departing from Ras Tanura, Qatari LNG terminals, or Jebel Ali must navigate through the strait. What the Cape avoids is the added risk at the Bab el-Mandeb and Suez Canal.
A ship headed to northern Europe faces two separate risks: Hormuz when leaving and the Red Sea on the return leg. Therefore, the decision is to either compound these risks or take the longer African route before reaching the Red Sea. Many operators have already decided to favor the Cape route.
The expenses are considerable. For a VLCC on a Gulf-to-Europe journey, the combined costs of the post-ceasefire Hormuz war risk premium, Red Sea war risk premium, and Suez Canal toll are already around $1.6 million to $1.8 million, not including any Iranian service fee. The Cape diversion adds roughly $1.0 million to $1.4 million in additional fuel and hiring expenses. Even without any Iranian fee, the Cape route is already competitive, and any fee above $200,000 to $300,000 makes it cheaper.
The practical threshold for the Iranian fee, where avoidance becomes a smart economic choice, is around $0.50 to $1.00 per barrel for tankers (about $1 million to $2 million per VLCC voyage) and roughly $50 to $100 per TEU for container ships calling at Gulf ports. Below these values, the fee is absorbable as a surcharge, provided sanctions clearance and insurance coverage can be secured. Currently, Iran's charges are already more than double the upper limit of this range.
However, this straightforward cost comparison doesn't capture the full impact. The Iranian fee is not just high; it’s problematic. Shipping companies can handle high costs if they are predictable, transparent, and insurable. In contrast, the Iranian mechanism creates a different situation: a politically motivated charge tied to a disputed legal framework, imposed by a state with uncertain domestic stability and potential US and EU sanctions for any owner who pays it.
In comparison, a Suez Canal toll is a commercial fee set by an established state authority with a clear and consistent rate history. Conversely, an Iranian fee for Hormuz will be viewed by P&I clubs, hull insurers, banks, and compliance lawyers as a geopolitical risk premium disguised as navigation service costs. It raises important questions about whether paying the fee exposes shippers to US sanctions and whether the peace agreement constitutes a General License or merely a political understanding. In the shipping world, an unresolved legal issue can be just as paralyzing as a clear prohibition.
This situation is similarly problematic for container and general cargo transports. The four largest container shipping lines—Maersk, MSC, CMA CGM, and Hapag-Lloyd—suspended Hormuz transit as of early March 2026, and since then, the Cape of Good Hope has become the standard route for Asia-Europe services due to the challenges posed by the Houthi campaign in the Red Sea.
Financial figures explain this shift. Taking the Cape route adds about 10 to 14 days and an additional 3,500 nautical miles to a typical Shanghai-Rotterdam route, resulting in a 30% to 40% increase in fuel consumption for round trips and adding $1.2 million to $1.8 million in fuel costs for a Panamax container vessel. On a per-container basis, this translates to an additional charge of around $100 to $180 per TEU due to increased fuel and operational costs before any other surcharges are considered.
Endorsements for war-risk cargo insurance for Red Sea transits had settled around $50 to $100 per TEU by early 2026 before the Hormuz crisis escalated the disruptions. The Drewry World Container Index reported Shanghai-Rotterdam rates at $3,180 per FEU for the week ending April 17, 2026, reflecting the Cape-route cost premium in both contract and spot pricing.
Asia-Europe freight rates have surged by 25% to 40% above pre-crisis levels, with an estimated 5% to 7% of global container fleet capacity affected by the longer Cape route, resulting in a reduction of effective market capacity by approximately 1.3 million to 1.8 million TEU. For general cargo operators and freight forwarders, this disruption leads to longer transit times of 34 to 38 days compared to 22 to 24 days via the Suez, necessitating tighter inventory controls, longer letters of credit, higher working capital, and reduced delivery timelines.
Major US retailers like Walmart, Target, and Amazon maintain inventory buffers of 60 to 90 days, and price increases influenced by the combined disruptions in Hormuz and the Red Sea began appearing in May and June 2026. The overall conclusion for container and general cargo shipping mirrors that of the tanker sector: the Cape route is not merely a temporary solution; it has become a permanent adjustment to shipping plans.
MOL, one of the largest shipping companies worldwide, has stated that its vessels will not resume normal transit through Hormuz until a concrete US-Iran agreement is in place and safety is sufficiently demonstrated in practice, not just in diplomatic statements. CMA CGM, which had 11 vessels trapped in the Gulf during the crisis, indicated that it will not assume a return to pre-conflict normalcy even after the strait reopens. These are not small, risk-averse companies making minor decisions; they are some of the most sophisticated maritime operators globally, and their caution signifies a genuine concern about the unstable legal and political climate surrounding Hormuz.
The situation is further complicated by the Houthi threat. The Red Sea campaign, which began in November 2023, lacks a diplomatic resolution, has shown no effective military solution, and has established its own informal toll system. A UN source cited in a Maplecroft analysis indicated that Houthis may be collecting up to $180 million per month in transit fees on their own. The consensus in the industry is that diversions through the Red Sea will persist at least until 2027. Container traffic through Bab el-Mandeb has dropped to 28 daily transits, down from over 70 prior to the Gaza conflict. Asia-Europe freight rates, which averaged $1,287 per FEU in 2023, soared to $4,588 per FEU by mid-2024 due to the Red Sea diversions alone, compounding the effects of the Hormuz crisis.
The Islamabad Declaration, whether intentionally or due to diplomatic vagueness, has granted Iran significant strategic leverage: the internationally recognized right to manage and likely charge for passage through a corridor that handles a fifth of the world’s oil trade. This kind of sovereign control is not easily undone in future negotiations. The real question is not if Iran will exploit this power but rather at what price and under what political circumstances.
The Strait of Hormuz will eventually reopen, and traffic will resume. However, the days when shipping through the Gulf was as straightforward as loading cargo, paying a canal fee, and maintaining an expected arrival time are over. In the foreseeable future, contracts, charter negotiations, and insurance renewals for Gulf operations will likely include a new line item that evaluates the cost of geopolitical uncertainty, calculated in dollars per barrel.
While the Strait of Hormuz may reopen, restoring the trust that once underpinned global trade in the region could prove to be far more challenging than simply reopening the waterway itself.