A Toll on a Strait Nobody Owns: The 20% Hormuz Fee That Lasted a Day

Article summary

A proposal to levy a 20 per cent fee on commercial vessels transiting the Strait of Hormuz — announced by the US President as a reimbursement charge and withdrawn a day later in favour of trade and investment arrangements — briefly made explicit what India's energy exposure actually costs. India sources roughly 40 per cent of its crude oil, 60 per cent of its LNG and 90 per cent of its LPG from West Asia through that channel, against an overall import dependence of about 88 per cent for oil, 60 per cent for LPG and around half for natural gas. On the assumption that 30 per cent of India's oil imports continued through the Strait, the fee alone could have added roughly $9 billion a year to the oil import bill, before any effect on LNG, LPG, fertilisers and industrial inputs; every $1 per barrel movement in crude translates into about $2 billion for India, which imports between 1.8 and 2 billion barrels annually. Oil imports had already surged 47 per cent year on year to $48.88 billion over March to May 2026. Legally the proposal was unworkable: Part III of the UN Convention on the Law of the Sea guarantees transit passage through international straits, which cannot be impeded or charged for, and this is regarded as customary international law binding even on states that have not ratified the Convention — as neither the United States nor Iran has.