Oil investors eye Malacca toll risk after Hormuz fee plan

Iran's push for control over the Strait of Hormuz has some energy market participants watching the Strait of Malacca. The worry: a tolling model that starts in the Persian Gulf could spread to Asia's busiest oil waterway.

Iran and Oman, sitting on opposite sides of the Strait of Hormuz, have presented the U.S. with a proposal to jointly administer the corridor and collect administrative fees. The U.S. and Iran agreed last month on a 60-day memorandum of understanding guaranteeing safe navigation. After that, Iran and Oman will define the strait's future administration with other Persian Gulf states, "in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz."

The Strait of Hormuz handles roughly 20% of global oil traffic. The notion of a service fee there has rattled investors who see a precedent for other strategic maritime corridors.

Janiv Shah, vice president of commodity markets at Rystad Energy, said some investors were getting "a little bit jittery" about the prospect of an oil shock from Malacca tolls.

"If we see a potential toll booth with Iran enacting upon the Strait of Hormuz, something similar could be enacted on others," Shah told CNBC's "Squawk Box Europe" on Monday. "The most important from a volume metric perspective is the Strait of Malacca."

The Strait of Malacca accounted for 29% of total maritime oil flows in the first half of 2025, according to the U.S. Energy Information Administration. Crude oil makes up just over 70% of total oil flows through the waterway each year. Spanning about 900 kilometers, it provides the shortest sea route from East Asia to the Middle East and Europe, bounded by Indonesia, Thailand, Malaysia and Singapore.

In April, Indonesia's Finance Minister Purbaya Yudhi Sadewa suggested the country could introduce tolls on ships using the strait, then walked back the idea. Indonesia's coastline forms the entire southern edge of the waterway. The establishment of a tolling system would be illegal under international law, which guarantees free passage through straits used for international navigation.

Indonesia President Prabowo Subianto and Singapore Prime Minister Lawrence Wong reaffirmed their commitment to unimpeded passage through the strait after a meeting in Jakarta on Monday.

Hunter Marston, director of the Southeast Asia program at the Sydney-based Lowy Institute, said in a June 23 note that while the Malacca Strait "easily" meets the definition of a choke point, it is not a flashpoint. "Institutions matter," Marston said, pointing to the Malacca Straits Patrol (MSP), jointly managed by Indonesia, Malaysia, Singapore and Thailand. "The arrangement benefits all parties as well as the global economy. Without this institution, the Malacca Strait would be just as vulnerable to capricious closure as the Strait of Hormuz."

Analysts at the Center for Strategic International Studies (CSIS) said Iran's actions had shown that controlling a maritime choke point could "significantly augment" a country's power and deterrence. The stakes are "even higher" in the South China Sea, CSIS analysts said, given the Strait of Malacca and the Taiwan Strait connect many of the world's major economic centers.

"Iran's efforts to control and toll traffic through the Strait of Hormuz have renewed fears that states could try to do the same to the Malacca Strait," CSIS analysts wrote July 1. "China's threats to use force against Taiwan have also put the Taiwan Strait at the epicenter of one of the world's most high-stakes geopolitical hotspots."

"If either of these two major straits is interrupted, rerouting options exist, they will come at a cost."

For oil investors, the immediate risk is not a Malacca toll tomorrow. The 60-day Hormuz MOU expires without a clear framework. The legal barriers to Malacca tolls are high. The institutional architecture of the MSP is real. The market is pricing a tail risk, not a base case. Tail risks can still move crude prices when sentiment shifts.

What would confirm the worry: a Hormuz toll framework that survives the 60-day window and includes a fee mechanism. What would weaken it: a clean renewal of the MOU without toll language, or a formal statement from Indonesia, Malaysia, Singapore and Thailand ruling out fees. The next 60 days decide which path the oil market takes.