Key Takeaways:
Investors are pricing in the risk that the Strait of Malacca could become the next maritime chokepoint to impose transit fees.
The prospect of tolls on the Strait of Malacca, which carries 29% of global seaborne oil, has unnerved energy investors after Iran and Oman proposed collecting fees on vessels transiting the Strait of Hormuz.
"Some investors are starting to get a little bit jittery about the prospect of an oil shock in the form of tolls in the Strait of Malacca," Janiv Shah, vice president of commodity markets at Rystad Energy, told CNBC.
The Strait of Malacca, spanning about 900 kilometers between Indonesia, Malaysia, Singapore and Thailand, handled 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 shipments through the waterway each year. By comparison, the Strait of Hormuz typically handles around 20% of global oil traffic.
If replicated in Southeast Asia, a tolling regime would increase shipping costs for the world's busiest energy trade route, potentially adding billions of dollars in annual transport expenses and raising crude prices for Asian importers that rely on the passage for more than 80% of their oil supplies.
The alarm was triggered after reports that Iran and Oman had presented the U.S. with a proposal to jointly administer the Strait of Hormuz, including the collection of administrative fees. The U.S. and Iran agreed in a memorandum of understanding last month to ensure safe navigation for 60 days, after which the strait's future administration would be defined by Iran and Oman in consultation with other Persian Gulf states.
Indonesia's Finance Minister Purbaya Yudhi Sadewa in April suggested the country could introduce tolls on ships using the Malacca Strait, before quickly walking back the idea. The establishment of a tolling system would violate international law guaranteeing free passage through straits used for international navigation. Indonesia President Prabowo Subianto and Singapore Prime Minister Lawrence Wong reaffirmed their commitment to unimpeded passage after a meeting in Jakarta on Monday.
A Chokepoint, Not a Flashpoint
Hunter Marston, director of the Southeast Asia program at the Lowy Institute in Sydney, said the Malacca Strait "easily" meets the definition of a chokepoint but is not a flashpoint. "Institutions matter," Marston said, pointing to the Malacca Straits Patrol, a joint security arrangement managed by Indonesia, Malaysia, Singapore and Thailand that ensures the waterway remains open to global trade. "Without this institution, the Malacca Strait would be just as vulnerable to capricious closure as the Strait of Hormuz."
Rerouting Comes at a Cost
Analysts at the Center for Strategic and International Studies said Iran's actions regarding Hormuz had shown that controlling a maritime chokepoint could "significantly augment" a country's power and deterrence. The stakes are "even higher" in the South China Sea, they said, given the existence of the Malacca Strait and the Taiwan Strait as two strategically vital waterways connecting major economic centers.
"If either of these two major straits is interrupted, rerouting options exist, but they will come at a cost," CSIS analysts said in a July 1 analysis. Alternative routes, such as the Lombok-Makassar passage through Indonesia, would add days to voyage times and increase fuel consumption, raising tanker rates and ultimately the cost of delivered crude.
The last time a major chokepoint faced a credible closure threat — the Strait of Hormuz in 2019 after attacks on tankers near Fujairah — Brent crude spiked about 15% within two weeks while maritime insurance premiums for vessels in the region surged tenfold.
This article is for informational purposes only and does not constitute investment advice.
