Tehran Rejects US Peace Proposal, Demands Sovereign Control Over Strait of Hormuz as War Tolls Mount

The demand for authority over the Hormuz is critical as it represents a calculated move for significant financial gain. As one of the world’s most vital energy chokepoints, the 33km-wide passage, shared geographically with Oman, saw between 100 and 135 ships daily pre-war, carrying 20 to 25 million barrels of crude primarily to India, China, Japan, and South Korea. Since the conflict began, Iran has enforced a de facto blockade, amplified by missile and drone strikes on tankers, driving insurance and freight costs to extreme levels. While a limited number of vessels have been permitted transit following back-channel talks and the payment of a "toll" reportedly totaling US$2 million per ship in Chinese yuan, the Indian government maintains a firm stance. A senior official from the Ministry of Shipping stated that no tolls have been paid, asserting that no permission is required to sail and that the decision remains with charterers and shipping companies.

Formal recognition of this authority would translate into a staggering financial windfall for Tehran, estimated at US$4.5 billion a month for crude tankers alone based on a conservative US$1-1.5 million toll per ship, with an additional US$800 million projected from gas tankers. These tensions have propelled benchmark Brent crude past US$110 a barrel, a 38 per cent increase since February 28. In the United States, average fuel prices crossed US$4 per gallon last month, intensifying pressure on Donald Trump. While the Indian government has absorbed costs to keep domestic prices relatively stagnant and has worked to diversify import sources, the long-term sustainability is questioned, as India previously relied on this channel for 40-50 per cent of its crude needs.

Beyond economics, control over the Hormuz allows Iran to function as the "gatekeeper" of the Gulf, leveraging its position alongside the Houthi-influenced Bab al-Mandab Strait to exert pressure on global energy flows. While non-aligned actors like India have seen some ships pass unscathed, U.S. and Israeli-flagged vessels have been stopped cold. Tehran reportedly intends to use the resulting revenue to rebuild infrastructure destroyed by U.S.-Israel strikes and restock its missile and drone arsenals. This move to formalize the Hormuz as a "managed corridor" serves as a strategic deterrent against further American or Israeli aggression, though international observers warn it could lead to renewed fighting and force Asian economies to inadvertently fund Iran's rearmament through inflated fuel costs.