Iran seeks full control over Strait of Hormuz with new law banning US and Israeli vessels

Iran’s parliament is reviewing legislation that would effectively give Tehran regulatory dominion over one of the most important chokepoints in global trade. The proposed law would ban vessels linked to the United States, Israel, and other nations Iran considers hostile from transiting the Strait of Hormuz unless they pay compensation for war-related damages.

Roughly one-fifth of the world’s oil consumption passes through this narrow waterway between Iran and Oman.

What the legislation actually does

The bill, first announced by Iranian lawmaker Mohammad Reza Rezaei Kouchi on April 19, 2026, goes well beyond symbolic posturing. It proposes transit fees that could reach 7% of a vessel’s cargo value for ships passing through waters Iran claims to regulate.

For vessels that refuse to comply, the penalties escalate sharply. Iranian state media reports that fines could climb to 20% of the total cargo value.

The legislation also creates a legal framework for selectively denying passage to ships connected to countries on Iran’s adversary list.

Iran’s legal justification leans on a patchwork of domestic statutes, including the 1964 Maritime Code and the 1993 Act on Marine Areas. Crucially, Iran has never ratified key provisions of the United Nations Convention on the Law of the Sea (UNCLOS), the international treaty that governs maritime navigation rights. That non-ratification gives Tehran room to argue its own interpretation of transit rights supersedes international norms.

The institutional machinery behind the move

Iran established the Persian Gulf Strait Authority on May 5, 2026, a dedicated regulatory body designed to oversee maritime transit in the region.

Iran has been actively blocking shipping through the strait since February 2026, and the new legislation would retroactively provide legal cover for actions already underway.

As of early August 2026, negotiations involving Iran, Oman, and the United States are focused on reaching an interim agreement about shipping routes and management in the strait.

Why this matters for energy markets

During the 1980s Tanker War, attacks on commercial shipping in the Persian Gulf disrupted oil flows and drew direct US military intervention.

A 7% fee on cargo value, applied to the millions of barrels transiting daily, would ripple through energy pricing worldwide. Countries that depend heavily on Gulf oil imports, particularly in East Asia, would face the most direct economic impact. Japan, South Korea, and India all receive substantial portions of their crude supply through the Hormuz corridor.

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