The third phase of the conflict: Governing the Strait

Military power may reopen the Strait of Hormuz, but it cannot restore the commercial confidence on which global trade depends. As the old model of freedom of navigation gives way to a new governance framework, the rules governing the world's most important maritime chokepoints are beginning to be rewritten.

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The Third Phase of the Conflict: Governing the Strait

The first phase of this conflict began in June 2025, with a renewed campaign in February 2026, and focused primarily on Iran's nuclear capability and regime change. When hostilities resumed in February, Iran closed the Strait of Hormuz, shifting the conflict into a second phase centered on restoring freedom of navigation and reopening the Strait of Hormuz.

The second phase culminated in the Memorandum of Understanding (MOU). Its objective was straightforward: restore the pre-war operating model of open commercial navigation. The agreement, however, demonstrated that the conditions which had made that system possible had fundamentally changed. Rather than sharing a common vision for reopening the Strait, the United States and Iran held fundamentally different views about how it should operate after the signed MOU. Those differing views quickly reignited into military confrontation.

Iran appears to view the arrangement as preserving its authority over commercial transit. The United States, by contrast, sought a return to the pre-war status quo. Those competing visions have ushered the conflict into a third phase. The pre-war operating model has broken down and what replaces it will shape not only the future of the Strait, but the future of global commerce.

The evidence is already visible. Neither side is advocating for a simple return to the previous system. Iran has sought to retain authority over commercial transit, while the United States has publicly discussed imposing security fees on cargo moving through the Strait. Although the proposals differ substantially, they share one important characteristic: both assume that commercial transit will operate under a new governance framework rather than the informal system of freedom of navigation that existed before the conflict.

The debate has therefore shifted from restoring the old order to designing a new order that replaces it.

The Limits of Rerouting

Much of the discussion surrounding the Strait of Hormuz focuses on oil. That is understandable given that approximately one-fifth of global petroleum supply transits the Strait. But as the table below illustrates, oil is only one component of the Strait's strategic importance.

Unlike crude oil, many of these supply chains cannot realistically be rerouted. They depend on fixed export infrastructure, geographically concentrated production and specialized industrialized facilities. Increasingly, the same is true for refined petroleum products.

If the world's supply chains cannot realistically reroute around Hormuz then they must restore confidence in transiting through it. That reality makes governance the defining challenge of Phase Three.

Military deterrence can suppress conflict but it cannot restore commercial confidence. Markets require predictable rules, transparent governance and institutions capable of enforcing them. History repeatedly follows the same pattern: as commerce becomes more valuable and disruption more costly, institutions emerge to reduce uncertainty. Marine insurance evolved into Lloyd's of London. International trade standardized commercial obligations through Incoterms. Global shipping operates under internationally recognized standards for navigation, safety and communications. In every case, the objective was the same: replacing uncertainty with predictable governance.

Restoring confidence in Hormuz therefore requires more than reopening the Strait. It requires an operating framework built on transparent rules, standardized procedures and an institution capable of administering them.

That is why the debate over a Hormuz toll has been widely misunderstood. A toll is more than a revenue mechanism. It is a governance mechanism. It creates an administrative authority, establishes standardized commercial procedures and finances the security architecture that protects one of the world's most important trade corridors. The debate, therefore, should be about who governs the Strait.

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Who Governs the Strait

A durable governance system cannot depend on one coastal state or one naval power. Global commerce demands neutrality. An institution perceived as serving national interests rather than commercial interests would struggle to gain legitimacy among shipowners, insurers, commodity traders and governments. Any authority responsible for governing the Strait must be independent, multinational and transparent.

No existing international organization was designed to administer commercial access to strategic waterways. The International Maritime Organization establishes navigational standards and maritime safety requirements, but governance of the Strait would require responsibilities well beyond its current mandate, including coordinating security arrangements, administering transit procedures, overseeing cargo valuation where required, collecting security contributions or transit fees, and resolving commercial disputes.

The absence of an institution creates an unusual geopolitical dynamic. The countries with the greatest military presence are not necessarily those with the greatest economic dependence on uninterrupted maritime trade. The political momentum for a new governance framework is therefore likely to come from the world's largest trading economies, whose dependence on strategic waterways gives them the strongest incentive to reduce commercial uncertainty—even if the institution itself must remain independent, multinational and politically neutral.

Hormuz is unlikely to remain unique. Once one strategic chokepoint adopts a governance framework, governments facing similar commercial and security challenges will inevitably ask why different rules should apply elsewhere. The Strait of Malacca, Bab el-Mandeb and the Strait of Gibraltar all confront many of the same questions surrounding security, commercial access and operational certainty.

Rather than creating separate authorities for every waterway, a more durable solution would be a single independent international authority responsible for governing natural maritime chokepoints. Such an institution would establish common operating procedures, coordinate recognized transit corridors, administer security frameworks, manage transit fees where applicable and provide an independent mechanism for resolving disputes.

For the first time, strategic waterways would be administered through a common governance framework rather than relying primarily on military deterrence.

Conclusion

If Phase One of the conflict was about Iran's nuclear program, and Phase Two was attempting to restore freedom of navigation, then Phase Three is about governing the Strait of Hormuz.

For generations, freedom of navigation depended primarily on military deterrence. Military power may reopen the Strait, but it cannot restore the commercial confidence required for global trade. That confidence requires governance. The rules governing the Strait are being rewritten. The question is who gets to write them.

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