How Iran is using “innocent passage” loopholes to justify levying toll fees at Hormuz

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WHAT WE’RE TRACKING TODAY

TODAY: Iran’s toll play for Hormuz passage relies on loopholes

Good morning, wonderful people. It’s a brisk read this morning — but today we ask one important question: Is Iran allowed under international law to charge tolls for passage through the Strait of Hormuz?

Also in today’s issue, we take a look at how disruptions to flows in Hormuz introduced a risk regulators never planned for: conventional marine fuel may simply be unavailable as domestic demand takes priority — which can fundamentally reshape how we think about the transition to clean shipping.

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ENERGY — Kuwait Petroleum has declared force majeure on crude oil and refined product shipments, invoking the contractual clause after the Hormuz blockade made it impossible to fulfill delivery obligations to customers unable to access the Arabian Gulf, Bloomberg reports. The move signals mounting supply disruptions from the chokepoint’s closure, though a person with knowledge of the matter told the business information service that shipments won’t come to a complete halt.

RAIL — Saudi Arabia and Jordan will activate a joint committee to study a rail link that runs through Syria, calling for route option studies and technical alignments. The line would cover Jaber (Jordan-Syria) and Al Omari (Jordan-Saudi), plugging Jordan into a north-south freight spine.

BACKGROUND- The Kingdom already has 5.5k km of rail reaching the Jordanian border, Transport and Logistics Minister Saleh bin Nasser Al Jasser said, making this an extension play. The rail push also follows a 1.7k km Saudi freight corridor already linking King Abdulaziz Port, King Fahd Industrial Port, and Jubail Commercial Port to Al Haditha Port on the border with Jordan — already building on the southern leg.

Why this matters: Saudi is stacking routing alternatives in multiple directions as risk reshapes trade flows. “In an interconnected world, resilience is not a luxury; it is the entry ticket to lasting growth,” Wolfgang Lehmacher, former head of supply chain and transport industries at the World Economic Forum, previously told EnterpriseAM.

Market watch

Oil prices dropped this morning as expectations of upcoming US-Iran talks renewed hopes for increased Middle Eastern oil supply, Reuters reports. Brent crude futures slipped USD 0.54 to trade at USD 94.94 / bbl by 03.00 GMT, while US West Texas Intermediate (WTI) dipped USD 1.11 to USD 88.50 / bbl.

The Baltic Index continues to rise: The Baltic Exchange’s dry bulk index — which tracks rates for the capesize, panamax, and supramax vessel segments — was up 2.6% to 2,633 points on Monday. The capesize jumped 4.2% to 4,300 points, while the panamax index rose 0.1% to 1,976. The smaller supramax edged up 0.5% to 1,422 points.

Data point

37.6% — that’s the increase in container volumes at Jeddah Islamic Port in the first half of April, with exports growing 37.6% y-o-y and imports up 51.2%, a Mawani spokesperson said on X.

Why it matters: The increase points to heavier reliance on Red Sea ports for trade and logistics flows amid Hormuz’s closure. The East-West pipeline depends this corridor to move crude and support exports of around 5 mn bbl / d. Saudi also launched its logistics corridors initiative to position Jeddah, Yanbu, and King Abdullah ports as fallback gateways for Gulf trade, alongside five new freight routes linking Red Sea ports to Arabian Gulf ports.

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Iran has leverage, but is it lawful?

Iran may be able to squeeze Hormuz — but it can’t legally monetize it. While Tehran may be rebranding this control as paid “safe passage” — backed by the Islamic Revolutionary Guard Corps — the law of the seas draws a clear line: transit through vital straits cannot be turned into a unilateral toll regime.

The law is clear on Hormuz

Hormuz is governed by the United Nations Convention on the Law of the Sea (UNCLOS), which establishes “transit passage” through international straits. That right cannot be suspended, and in practice, it ensures uninterrupted navigation.

“That passage cannot be suspended at all,” Sotirios Lekkas, an international law lecturer at the University of Sheffield, tells EnterpriseAM.

The rules are straightforward: Article 38 of UNCLOS ensures unimpeded transit passage through international straits. Article 44 requires bordering states not to hamper that passage, while Article 26 prohibits charging foreign vessels simply for transiting, except for specific services actually rendered and applied without discrimination.

“If Iran and the United States are at war, that entitles Iran to use force against the US — but how does that allow tolls on neutral vessels?” Lekkas questions. “Under the law of the sea, that position has no […] basis and would amount to a clear violation.”

ICYMI- The US seized an Iranian cargo ship for allegedly attempting to breach its naval blockade, which President Donald Trump previously said would remain in full force until a peace agreement is signed. Tehran pledged to strike back and said it would not take part in a second round of ceasefire talks, upending Washington’s plans to kick off a fresh round of negotiations before the ceasefire expires tomorrow.

What is the workaround?

States rarely admit to breaching international law — they reinterpret it. “Any norm is subject to interpretation. No country says, ‘Yes, we are breaking international law.’ They frame their actions to appear legitimate,” Nikolaos Nikolakakis, an assistant professor at Zayed University, tells EnterpriseAM.

Iran’s interpretation hinges on its view that transit passage does not bind it. Because it hasn’t ratified UNCLOS, Tehran argues it is not obligated to follow that regime, and instead leans on “innocent passage” to justify a broader scope of control.

That opens the door to stricter measures. “Under innocent passage, Iran could impose conditions, require coordination, levy environmental fees, and restrict vessels it deems a security risk,” Nikolakakis says — especially those tied to countries it considers adversaries, such as the US and Israel.

At its core, the approach is strategic. “Hormuz is Iran’s biggest leverage — and it knows it,” Nikolakakis says. Even in Washington, some officials now recognize that military threats are unlikely to secure passage, while direct intervention would be highly risky.

The de-escalation window closed

For now, escalation appears constrained on all sides. “Currently, nobody has the political willingness to use force,” Nikolakakis highlights. GCC states pushed for Security Council backing to forcibly reopen the strait, but that effort failed to garner support from Europe, Russia, or China. Trump has also been unable to build up international backing for military action, Nikolakakis says.

When law falls behind

The gap is structural: “The law has been shaped because it works in favor of the industry, but there is no ready-made response to a crisis like,” Lekkas explains. As a result, shipping firms will try to find workarounds — finding solutions where frameworks offer little guidance.

And the consequences are immediate: The risk shifts to shipowners, insurers, and cargo interests — who must act ahead of any juridical clarity or diplomatic resolution, Lekkas says.

Illegality cuts both ways

“A blockade is a belligerent act — an act of war,” Nikolakakis says. To hold up legally, it must be declared, notified, and enforced. “Iran’s coastline is at least a thousand miles,” Nikolakakis notes — making a legally effective blockade difficult to sustain. “The American response is also unlawful, the blockade of Iranian ports — or the blockade of the strait as Trump called it — is unlawful,” he notes.

Clean shipping may make sense now more than ever

The Hormuz disruptions introduced a disruptive scenario: Conventional marine fuel can become unavailable in key markets — and expensive — as domestic demand absorbs export supply under stress, according to Rystad Energy.

The market has already started repricing that risk: Singaporean very low sulfur fuel oil and low sulfur marine gas oil (LSMGO) prices surged on supply-risk perception rather than confirmed shortages — with forecasts pointing to LSMGO possibly breaching USD 1.2k per ton before easing — with normalization expected mid-next year.

The price action told a useful — if incomplete — story: Conventional fuels reacted sharply because they are heavily traded and exposed to real-time risk repricing. In contrast, alternative fuels appeared more stable — less because they are resilient, and more because market depth and trading liquidity remains limited.

A substitute makes sense now: The shock around Hormuz has strengthened a more durable rationale for alternative fuels — one that doesn’t depend on whether regulators hold the line, but instead reflects concerns about access. Alternative fuels are emerging as a hedge against a system where fuel availability can no longer be taken for granted.

At a time where policy uncertainty deepens: The International Maritime Organization’s Net Zero Framework is heading into October’s Marine Environment Protection Committee session under pressure from the US, Japan, and major oil producers — raising the risk of a diluted framework that creates uncertainty without delivering a clear carbon price.

But each substitute is playing a different game: Biodiesel faces tightening feedstock competition — particularly from sustainable aviation fuel mandates. Bio-LNG works where shipowners can tap surplus unit markets, but its use remains limited across fleets. Biomethanol is gaining traction on scale —led by China — even as supply lags.

The gap between what is technically viable and what can scale commercially remains the key constraint. E-methanol retains engine compatibility advantages, but its higher production costs limit near-term expansion without policy support. Ethanol is credible on select non-EU routes — although it remains niche, Meanwhile, ammonia is still behind — requiring both policy support and infrastructure buildout that energy security logic alone are unlikely to deliver.

Previous energy shocks have driven structural change rather than temporary dislocation — and this one arrives with some alternative technologies already commercially available. The constraint is no longer invention, its infrastructure and capital deployment, both of which become easier to justify under security risk.

For shipowners, voyage planning, bunkering, and fuel sourcing now carry supply reliability risk — alongside compliance exposure. The advantage shifts to owners who can build flexibility into their fuel mix and sourcing strategy. That turns fuel into a competitive lever — early movers who secure diversified supply chains and optionality across fuel types are better positioned to absorb shocks.

Royal Air Maroc adds more capacity with new 737-8 Max

RAM keeps the delivery run going: Moroccan national carrier Royal Air Maroc (RAM) has taken delivery of a new Boeing 737-8 Max, marking the second aircraft received under a six-plane lease agreement with Aviation Capital Group, which is scheduled to wrap up by 2026. This follows another 737-8 Max delivery last month, as the carrier continues to expand its narrowbody fleet to support network growth and advance its fleet modernization strategy.

Calendar

APRIL

23-24 April (Thursday-Friday): Sustainability World Summit, Frankfurt, Germany.

28-30 April (Tuesday-Thursday): Mediterranean Ports and Logistics, Porto, Portugal.

MAY

12-14 May (Tuesday-Thursday): Aviation Energy Forum (AEF), Paris, France.

19-21 May (Tuesday-Thursday): Ground Handling Conference (IGHC), Cairo, Egypt.

19-21 May (Tuesday-Thursday): Terminal Operations Conference & Exhibition, Hamburg, Germany.

JUNE

2-4 June (Tuesday-Thursday): ProPak Mena, Cairo, Egypt.

4-5 June (Thursday-Friday): Supply Chain and Logistics Summit, Amsterdam, Netherlands.

6-8 June (Saturday-Monday): IATA World Air Transport Summit, Rio de Janeiro, Brazil.

10-11 June (Wednesday-Thursday): Black Sea Ports and Logistics, Istanbul, Turkey.

21-24 June (Sunday-Wednesday): Saudi Smart Logistics, Riyadh, Saudi Arabia.

22-23 June (Monday-Tuesday): Decarbonizing Shipping Forum, Rotterdam, Netherlands.

AUGUST

30 August-1 September (Sunday-Tuesday): Air Cargo Middle East, Riyadh, Saudi Arabia.

30 August-1 September (Sunday-Tuesday): Saudi Warehouse and Logistics Expo, Riyadh, Saudi Arabia.

SEPTEMBER

16-17 September (Wednesday-Thursday): Saudi Maritime & Logistics Congress, Dammam, Saudi Arabia.

22-24 September (Tuesday-Thursday): Seamless Middle East, Dubai, UAE.

28-30 September (Monday-Wednesday): Transport Logistics Middle East, Riyadh, Saudi Arabia.

OCTOBER

12-14 October (Monday-Wednesday): The Airport Show, Dubai, UAE.

21-22 October (Wednesday-Thursday): Global Ports Forum, Singapore.

26-29 (Monday-Thursday): Air Cargo Forum, Miami, US.

27-29 October (Tuesday-Thursday): Routes World, Riyadh, Saudi Arabia.

NOVEMBER

2-5 November (Monday-Thursday): ADIPEC Maritime and Logistics Exhibition and Conference, Abu Dhabi, UAE.

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