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Client Alert: Force Majeure in the Shadow of the Iran War: What Contract Holders Must Do Right Now

In the last ten days, the Iran war and the closure of the Strait of Hormuz have moved from geopolitical risk to operational crisis. QatarEnergy has declared force majeure on LNG deliveries. Major oil and gas producers have suspended shipments. Tankers have been struck or stranded. For companies holding supply, delivery, and commercial contracts with Middle East delivery obligations touching upon the Strait of Hormuz, the question is no longer whether to engage force majeure — it is whether your clause will hold under scrutiny, and whether you have already missed the window to invoke it.

The boilerplate force majeure clause that felt adequate in a stable world is now being tested against one of the most significant supply disruptions in decades. Here’s what you need to know and, critically, what you should do immediately.

Key Disruption Events — Strait of Hormuz Crisis (March 2026)
                                                                                       
The Three-Part Legal Test

The most common misconception is that any force majeure clause referencing “war” or “embargo” provides automatic protection. It does not. Under New York law, English law, and most civil law systems, courts and arbitral tribunals apply a demanding three-part test:
 

• The event must qualify: It must fall expressly within the contractual definition of a force majeure event — whether war, government action, sanctions, embargo, or a recognized natural or political catastrophe.
• The event must prevent performance: The disruption must render performance legally or physically impossible — not merely more expensive, more difficult, or commercially unattractive. A higher cost of chartering an alternative vessel is generally insufficient.
• Notice and mitigation must be strictly observed: The affected party must comply precisely with the clause’s notice and mitigation obligations. Failure on this limb alone can extinguish protection entirely.

Failure on any single limb is likely fatal to a force majeure claim. This is not a time for assumptions or delayed action.

The Notice Trap: Short Windows That Can Cost Millions

Many contracts impose notice obligations from the moment a force majeure event arises or becomes known. Missing this window can extinguish your protection entirely — regardless of how compelling the underlying facts are. Steps to take immediately:
 

• Identify the exact notice provision in each at-risk contract — recipient, required form (written, email, fax), and required content.
• Issue a protective notice now. Courts and arbitral tribunals have generally permitted protective or contingent notices issued pending full legal assessment.
• Document the date, time, method, and recipient of every notice sent and preserve all delivery confirmations.
• Review whether your counterparty has already served notice on you and assess whether any response obligation has been triggered on your end.

Governing Law: The Outcome Varies Significantly

Cross-border contracts are governed by a range of legal systems, and the outcome of a force majeure claim under one system may differ sharply from another. Three critical scenarios:

1. New York / U.S. Law: Applies a “commercial impracticability” standard alongside contractual force majeure. Depending on the clause, true impossibility may be required. Courts will assess whether the risk was foreseeable at contracting and whether it was allocated elsewhere in the agreement.
2. English Law: Strictly construed. Force majeure typically suspends — but does not permanently excuse — obligations. The event must render performance legally or physically impossible. Payment obligations rarely qualify for suspension. Courts scrutinize whether the affected party contributed to the impossibility or failed to mitigate.
3. Civil Law Systems (UAE, Qatar, French): Hardship and force majeure doctrines often operate in parallel. Sovereign prohibitions and government bans receive broader treatment. Parties may have a right to request renegotiation before seeking termination. A price review or rebalancing claim may be more viable than strict force majeure.

For cross-border deals involving counterparties in multiple jurisdictions, a jurisdiction-by-jurisdiction assessment is essential before invoking any clause. A declaration valid under one governing law may constitute a repudiatory breach under another.
 
Adjacent Risks You Cannot Ignore

The force majeure analysis does not exist in isolation. Contract holders must simultaneously assess the following:
 

• Sanctions and Export Controls: U.S., EU, and UK sanctions relating to the Iran conflict may independently prohibit performance — and may or may not qualify as force majeure under your governing law. A sovereign ban that is itself a breach of sanctions does not automatically become force majeure.
• Change-in-Law Clauses: Sovereign bans or new regulatory prohibitions may trigger separate change-in-law provisions, with different notice periods, different cost allocation, and different consequences from force majeure.
• Hedging and Financial Instruments: Disruption to physical delivery may trigger margin calls, payment obligations, or events of default under linked hedging contracts. The financial exposure can dwarf the physical delivery value and must be reviewed in parallel.
• MAC Clauses: In offtake agreements, project finance structures, and long-term supply arrangements, Material Adverse Change provisions may be triggered independently of — or in addition to — force majeure, particularly where disruption affects creditworthiness or project viability.

 
Actionable Steps to Prepare

For companies with supply contracts exposed to Middle East disruption, the following steps should be initiated immediately:
 

• Conduct an Emergency Contract Audit: Identify all at-risk contracts and map their force majeure, hardship, MAC, change-in-law, and notice provisions.
• Issue Protective Notices: Do not wait for certainty. Issue protective notices under all contracts where performance is at risk and document every step.
• Preserve Evidence: Collect and preserve contemporaneous evidence of disruption: carrier communications, port authority notices, government decrees, sanctions updates, and market price data.
• Assess Financial Exposure: Review linked financial instruments and hedging positions for knock-on obligations or defaults triggered by physical delivery disruption.
• Engage Specialist International Counsel: For any contract with significant value or involving cross-border governing law, engage counsel with multi-jurisdictional expertise without delay.

 
Looking Ahead

The Strait of Hormuz disruption has the potential to reshape long-term supply relationships, accelerate the renegotiation of at-risk contracts, and generate a wave of force majeure and sanctions-related disputes across English, U.S., and civil law jurisdictions. Companies that act quickly — preserving rights, issuing notices, and assembling their legal and commercial response now — will be in a significantly stronger position than those who wait for certainty before acting.

The question is not whether your force majeure clause was drafted with this scenario in mind. The question is whether you can make it work, under your governing law, with the language you have — and whether you have taken every step available to preserve that protection. Whiteford is available to assist with contract review, dispute strategy, and regulatory considerations. Feel free to reach out to us to discuss your matter.

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The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.