Strait of Hormuz Disruptions: Force Majeure & Contractual Implications

Strait of Hormuz Disruptions Trigger Force Majeure Claims, Supply Chain Reassessment

Escalating tensions in the Middle East and the effective closure of the Strait of Hormuz are sending ripples through global energy markets, maritime transport, and supply chains. Approximately one-fifth of the world’s seaborne oil and LNG trade, and around 11 percent of global trade transits this critical waterway. With commercial vessel passage severely disrupted and hundreds of ships anchored on both sides, companies are increasingly invoking force majeure clauses to excuse potential delays or non-performance of contractual obligations. However, successfully claiming force majeure is proving complex, requiring careful case-by-case evaluation.

The situation reached a critical point in early March 2026, with QatarEnergy declaring force majeure on LNG deliveries and major oil and gas producers suspending shipments. Multiple tankers have been struck or detained, further exacerbating the crisis. Oil prices have surged, and refining disruptions are spreading to Asian and European markets. This isn’t simply a geopolitical event; it’s a test of the resilience of global trade infrastructure and the legal frameworks designed to manage such disruptions.

Contractual Language is Paramount

The first step in assessing any force majeure claim is a meticulous review of the contract’s specific wording. A force majeure clause, if present, defines the unforeseen events beyond a party’s control that may excuse performance. Common examples include warfare and hostilities, which could potentially encompass the current conflict impacting the Strait of Hormuz. However, the devil is in the details. The degree of foreseeability is a key point of contention. Contracts entered into after the escalating tensions of late February 2026, and particularly after Iran’s parliamentary vote in June 2025 regarding potential closure of the Strait, may face greater scrutiny regarding whether the disruption was reasonably foreseeable.

In the absence of a specific force majeure clause, the governing law of the contract becomes crucial. Some legal frameworks, such as those in France, Spain, and China, provide statutory force majeure defenses. Conversely, jurisdictions like Germany, Singapore, England, and most US states lack such provisions, leaving parties without an automatic defense and requiring them to explore alternative remedies like frustration of contract.

Establishing a Causal Link and Mitigating Circumstances

Even with a valid force majeure clause or applicable statutory defense, a direct causal link must be established between the disruption in the Strait of Hormuz and the inability to perform. The threshold for this link varies; some contracts require impossibility of performance, while others accept mere hindrance or delay. The current situation presents complexities, as shipping companies are employing various strategies – rerouting vessels around Africa via the Cape of Good Hope, discharging cargo at alternative ports, or facing outright blockage. These actions, while attempts to mitigate the disruption, can lead to delays, increased costs, and potential non-delivery claims, particularly for time-sensitive goods.

a party invoking force majeure must demonstrate that it made reasonable efforts to overcome the obstacle. Simply incurring higher operational expenses, such as those associated with longer shipping routes, may not be sufficient to excuse performance if performance remains feasible, albeit more costly. The reasonableness of alternative routes and strategies will be a key consideration.

Allocation of Supply and Notice Requirements

The situation also raises questions about the allocation of limited supply. As seen during the COVID-19 pandemic, when a force majeure event reduces but doesn’t eliminate supply, parties may be obligated to allocate available resources reasonably among affected customers. While a pro rata allocation isn’t always required, a disproportionate or commercially opportunistic allocation could undermine a force majeure claim. A multi-jurisdictional assessment of allocation risks is advisable for businesses with global customers.

Finally, strict adherence to notice provisions is essential. Force majeure clauses typically require timely notification of any impediment to performance, often demanding notice “without delay.” Determining the precise moment performance becomes impeded can be challenging in a dynamic situation like the Strait of Hormuz, but a precautionary notice may be advisable, subject to applicable law. Failure to provide timely notice can invalidate a force majeure claim and potentially forfeit other contractual rights.

The application of force majeure is not automatic. It requires a comprehensive legal analysis considering contractual terms, governing law, and specific factual circumstances. Even if force majeure is not applicable, alternative remedies like frustration of contract or hardship clauses may offer recourse. Businesses navigating these disruptions should seek expert legal counsel to assess their specific situation and protect their interests.