Iran has significantly escalated its efforts to assert control over the Strait of Hormuz, a critical global chokepoint, by announcing the formation of a new body, the Persian Gulf Strait Authority (PGSA), to manage the key passage. This move, declared by the country’s Supreme National Security Council on Monday, April 29, 2026, signals a bold step towards formalizing Tehran’s de facto influence over the strategic waterway. The PGSA is slated to provide "real-time updates" on maritime operations and developments within the strait, a passage through which an estimated 20 percent of the world’s oil and gas supply transits during peacetime.
This announcement follows closely on the heels of reports surfacing just two days prior, on Saturday, April 27, 2026, indicating Iran’s intention to offer a unique insurance scheme for vessels navigating the Strait of Hormuz and the surrounding Gulf waters. According to Iran’s semi-official Fars news agency, this initiative, to be facilitated via the "Hormuz Safe website," would provide maritime cargo insurance with payments settled in cryptocurrency, such as Bitcoin. The proposed program is optimistically projected to generate over $10 billion in annual revenue for Iran, covering cargo from the moment of confirmation with a signed receipt provided to the owner. Tehran frames these measures as essential for defraying the costs of repairs necessitated by nearly six weeks of "US-Israeli bombing" of the country, which began on February 28, 2026. Prior to this period, the Strait of Hormuz was largely open and free for all vessels.
The Strategic Crucible: Hormuz’s Indispensable Role
The Strait of Hormuz is more than just a waterway; it is an indispensable artery for global energy markets and international trade. Connecting the Persian Gulf with the Arabian Sea and beyond, it is the only sea passage from the Persian Gulf to the open ocean. Its narrowest point is just 21 nautical miles (39 km) wide, making it highly susceptible to disruption. Beyond the stated 20 percent of global oil and gas, the strait witnesses the passage of approximately 30 percent of all seaborne traded oil, equating to roughly 17-20 million barrels per day. Major oil producers like Saudi Arabia, Iran, UAE, Kuwait, and Iraq, along with Qatar, a significant liquefied natural gas (LNG) exporter, rely heavily on this passage. Any disruption here has immediate and profound ripple effects on global energy prices, supply chains, and the economies of nations far removed from the Middle East.
Historically, the Strait has been a flashpoint for geopolitical tensions. From the "Tanker War" of the 1980s during the Iran-Iraq War, where both sides attacked neutral shipping, to more recent incidents involving tanker seizures, drone attacks, and alleged sabotage, the strait has consistently been a stage for regional and international power struggles. Iran, with its extensive coastline along the northern shore, has repeatedly leveraged its geographic position to assert influence and respond to perceived threats or economic pressures, particularly those stemming from international sanctions.
A Chronology of Escalation and Economic Pressure
The recent announcements by Iran are set against a backdrop of escalating conflict and economic strain. The "US-Israel war on Iran," commencing on February 28, 2026, has fundamentally altered the security landscape of the region. This period has seen significant military actions and widespread destruction within Iran, leading to a de facto closure of the Strait of Hormuz by Iran in retaliation. This closure has severely disrupted global energy markets, causing fuel prices to soar as oil tankers have largely been unable to pass through, exacerbating an already volatile global economic climate.
Since the onset of these military actions, Iranian officials and lawmakers have consistently explored various avenues to impose transit charges or security fees on vessels utilizing the Strait. Tehran has even admitted to having already collected ad hoc tolls from some ships attempting to navigate the waterway, with reports from Bloomberg in March 2026 suggesting payments as high as $2 million per voyage. The current insurance proposal appears to be a sophisticated evolution of this strategy, attempting to package the "toll" within a commercial risk-management service. On April 13, 2026, the situation further complicated when the US implemented a naval blockade, affecting all ships traveling to or from Iranian ports, adding another layer of uncertainty to maritime operations in the region.
International Law and Unilateral Assertions
Globally, the notion of ships being compelled to pay any fee to traverse an international strait has been met with universal condemnation. The United Nations Convention on the Law of the Sea (UNCLOS), a cornerstone of international maritime law, explicitly prohibits states from levying tolls or transit fees on vessels exercising the right of transit passage through international straits or territorial seas. UNCLOS Article 38 and 44 emphasize the principle of "transit passage," which allows for freedom of navigation and overflight solely for the purpose of continuous and expeditious transit through a strait used for international navigation. It stipulates that states bordering such straits shall not impede transit passage and shall not suspend it.
The US Department of State reiterated this stance earlier this month, asserting that international waterways must remain open to global shipping and that no single country should impose unilateral tolls on transit passage. China, a major beneficiary of free navigation through the Strait, has also seemingly voiced its opposition to any move restricting unhindered passage. Following a meeting between US President Donald Trump and Chinese counterpart Xi Jinping, the White House stated that President Xi "made clear China’s opposition to the militarization of the strait and any effort to charge a toll for its use," a statement Beijing has not disputed. UN Secretary-General Antonio Guterres has also called for an immediate reopening of the passage, advocating for "no tolls and no discrimination."
The Proposed ‘Hormuz Safe’ Scheme: Mechanics and Challenges
The "Hormuz Safe website" proposes a range of maritime insurance products, coupled with an "encrypted verification capability" for vessels. The reliance on cryptocurrencies like Bitcoin for transactions is a notable feature, ostensibly designed to circumvent the traditional international financial systems heavily impacted by sanctions against Iran. The projected $10 billion annual revenue would be a substantial boost for Iran’s economy, which has been severely hampered by sanctions and the ongoing conflict, potentially offering a new, albeit controversial, source of income.
However, the viability and credibility of this scheme face formidable obstacles. Academic Abdul Khalique, head of the Liverpool John Moores University Maritime Centre, highlights "serious financial, legal, and operational obstacles." Khalique points out that marine insurance requires substantial reserves and robust international reinsurance support to cover potentially catastrophic losses. Iran’s access to global financial and insurance markets is severely restricted by existing sanctions, making it difficult to establish the necessary financial backing. Without credible reinsurance, shipowners would likely doubt the actual payment of claims following accidents, spills, or seizures. Furthermore, international maritime regulators and port authorities might reject Iranian-issued certificates, effectively preventing insured ships from docking or securing financing globally.
The use of Bitcoin also introduces its own set of challenges. Many governments and financial institutions associate cryptocurrency transactions with sanctions circumvention and money laundering risks, potentially deterring legitimate shipping companies. Cybersecurity threats, the volatile nature of cryptocurocurrencies, limited global recognition, and the inherent geopolitical tensions in the Gulf further erode confidence in such a program. The US naval blockade adds another layer of complexity; it remains unclear whether the US would permit vessels that have paid Iran for insurance to transit, even if Tehran grants passage.
The Global Maritime Insurance Landscape Under Duress
The ongoing conflict has already profoundly impacted the global maritime insurance sector. Since the hostilities commenced more than two and a half months ago, global maritime insurers have drastically increased war-risk premiums for ships entering the Gulf. In March, within days of the initial US-Israeli strikes on Iran, insurance costs for vessels transiting the Strait of Hormuz surged by as much as fivefold.
Initially, several leading insurers, including Gard, Skuld, NorthStandard, and the American Club, announced the cancellation of war-risk coverage for vessels operating in the Gulf region, citing the heightened risks. This mass withdrawal underscored the severity of the situation and the immediate danger to maritime commerce. Subsequently, some insurers re-entered the market, often with crucial government-backed support. For instance, Chubb joined a $20 billion US-supported maritime reinsurance program specifically aimed at restoring commercial shipping through the Strait of Hormuz, offering war-risk cover for hulls, cargo, and liability.
Despite these efforts, shipping companies have remained highly cautious. Many operators continue to avoid Gulf routes, prioritizing crew safety and expressing fears of potential attacks on vessels or seizures. The specter of US sanctions further complicates matters, as the United States has explicitly warned companies that making payments to Iran for safe passage through Hormuz could expose them to severe punitive measures. This creates a difficult dilemma for shipping firms: navigate a highly dangerous zone with potentially invalid Iranian insurance, or face prohibitive costs, sanctions risks, or complete avoidance of the critical waterway.
International Rejection and Geopolitical Divisions
As of now, no country or major shipping firm has publicly announced its intention to accept Iran’s insurance offer should it fully materialize. The united front presented by the US, China, and the UN against unilateral tolls on the strait underscores the broad international consensus on the principle of freedom of navigation.
Academic Khalique suggests that any acceptance of the Iranian insurance plan would likely be "limited and highly selective." He posits that "countries already wary of Western sanctions, such as China or some smaller trading states, may consider Iranian insurance if it lowers costs or guarantees passage through the Strait of Hormuz." These nations might prioritize securing passage and potentially lower immediate costs over adherence to international norms or concerns about sanctions.
However, Khalique emphasizes that the majority of maritime powers and established shipping firms are unlikely to engage with the scheme. He states, "Insurance depends on trust, enforceability, and internationally recognized legal standards." Most ports, banks, and shipowners rely on established insurers connected to major financial hubs in London, Europe, or Asia, whose credibility and financial backing are unquestioned. Consequently, the Iranian scheme "would probably attract only niche or politically aligned participants," failing to achieve broad international recognition or legitimacy.
Broader Implications for Global Trade and Regional Stability
The implications of Iran’s latest moves extend far beyond the immediate economic impact on energy markets. This assertion of control, whether through a new authority or a mandatory insurance scheme, represents a direct challenge to the established international legal framework governing freedom of navigation. If Iran successfully imposes these measures, it could set a dangerous precedent for other states controlling strategic chokepoints, potentially leading to a fragmentation of international maritime law and an increase in unilateral assertions of sovereignty over global commons.
Economically, sustained disruptions or increased costs for transit through Hormuz would invariably lead to higher energy prices, impacting consumers and industries worldwide. Supply chains, already fragile from recent global events, would face further stress, potentially triggering inflation and slowing global economic growth. The humanitarian impact of prolonged conflict and economic hardship in the region also remains a grave concern.
Geopolitically, these actions heighten the risk of further escalation in an already volatile Middle East. The US naval blockade and Iran’s countermeasures create a complex and dangerous maritime environment, increasing the potential for miscalculation or accidental confrontation. The future of the Strait of Hormuz, and indeed the broader stability of the region, hinges on the delicate balance between Iran’s perceived security and economic imperatives and the international community’s unwavering commitment to freedom of navigation and adherence to international law. The coming weeks and months will be critical in determining whether a diplomatic resolution can be found or if these unilateral assertions will lead to further entrenchment of conflict and economic disruption.
