SINGAPORE, July 13 — A proposed 20% toll on cargo vessels transiting the Strait of Hormuz could push up global oil prices and add billions to annual shipping costs, with direct consequences for energy-importing nations across Asia. The levy, based on an average toll of $600,000 per vessel in 2023 and an estimated 17,000 ships passing through the strait each year, would increase shipping costs by roughly $10 billion annually.
If passed on to consumers, the added expense could raise crude oil prices by $1.50 to $2.00 per barrel, lifting Brent crude from its 2023 average of $82 per barrel to around $84 per barrel. For communities across Asia, particularly in countries that rely heavily on Persian Gulf crude, this is more than a line on a balance sheet.
China imported 1.5 million barrels per day from Iran in 2024, while India imported 500,000 barrels per day from Iran in 2023. The International Energy Agency reported in 2024 that global oil demand stood at 102 million barrels per day, meaning any sustained disruption or cost increase at the Strait of Hormuz would be felt across supply chains.
Alternative routes and regional capacity
Several bypass options exist, though none can fully replace the strait’s throughput. Saudi Arabia operates the 745-mile East-West Pipeline, with a capacity of 5 million barrels per day. The United Arab Emirates runs the 225-mile Habshan-Fujairah pipeline, capable of moving 1.5 million barrels per day.
Together, these two pipelines offer some relief for Gulf producers seeking to export without transiting the strait. Egypt’s Suez Canal and the SUMED pipeline system handle 2.5 million barrels per day, providing another potential rerouting option for cargoes headed to Europe and the Americas.
However, these alternatives add distance, time, and cost, and their combined capacity does not match the volume that typically moves through the Strait of Hormuz. The United States, by contrast, is less exposed. In 2023, U.S. oil production reached 12.9 million barrels per day, significantly reducing its dependence on Persian Gulf supplies.
For American consumers, the direct impact of a Hormuz toll would likely be muted compared to Asian buyers.
Insurance costs and market uncertainty
Beyond the toll itself, shipping insurance premiums could also rise. During heightened tensions in 2019, war risk premiums in the region climbed to 0.5% of hull value. A similar spike today would further increase the cost of moving oil and goods through the waterway, adding another layer of expense for shippers and, ultimately, for end users.
For families across Asia, where fuel and transport costs make up a significant share of household spending, the question is how much of these added costs will be passed down the supply chain. The toll’s impact on crude prices is modest in percentage terms, but when layered onto existing volatility in energy markets, even a few dollars per barrel can translate into higher prices for cooking gas, electricity, and transport.
What remains to be seen is whether the toll will be fully implemented, how shippers and insurers will respond, and whether alternative routes will absorb enough traffic to ease pressure on prices. For now, the numbers are clear: a 20% levy on the world’s most critical oil chokepoint carries a price tag measured in billions, and the bill may land closest to home for Asia’s largest importers.
Sources
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