Iran has formally established a managed maritime zone in the Strait of Hormuz, a critical chokepoint for global oil supplies.
The newly created Persian Gulf Strait Authority, or PGSA, recently published a map detailing the precise boundaries of this control zone. It stated that any vessel wishing to pass through must now coordinate with and obtain a permit from the PGSA. This marks a significant shift from previous, more sporadic ship seizures to a formal, administered system that Tehran can enforce with clear rules.
This new policy directly clashes with international law. Specifically, the UN Convention on the Law of the Sea (UNCLOS) guarantees the right of 'transit passage' through international straits, meaning ships should be able to navigate without impediment. While states can charge for specific services rendered, Iran's permit requirement is viewed by many, including the EU and Gulf Cooperation Council (GCC), as an illegal toll on mere passage. Tehran, however, is attempting to reframe the situation as a managed corridor where it provides safety and security services.
Several factors led to this moment. First, a recent escalation of tensions, including ship seizures and attacks in early May, demonstrated Iran's willingness to enforce its claims, lending credibility to the PGSA's authority. Second, on the diplomatic front, a stalemate at the UN Security Council, where Russia and China vetoed a resolution to protect commercial shipping, may have emboldened Iran to act unilaterally. Third, this move builds on a pattern of coercive actions, including tanker seizures by the IRGC over the past year, which set a precedent for this more formalized control.
Unsurprisingly, these developments have impacted global markets. The increased risk has created what is known as a 'geopolitical risk premium' on oil prices. Brent crude, the international benchmark, has risen, and its price gap over the U.S. benchmark (WTI) has widened. This shows that traders are pricing in the real possibility of supply disruptions in the Strait of Hormuz, regardless of modest production increases by OPEC+.
- Strait of Hormuz: A narrow waterway between Iran and Oman, through which about a fifth of the world's oil consumption passes daily.
- UNCLOS: The UN Convention on the Law of the Sea is an international treaty that defines the rights and responsibilities of nations with respect to their use of the world's oceans.
- Geopolitical Risk Premium: An additional amount that investors demand to compensate for the risks associated with political instability or conflict in a particular region.