In addition to its human toll, the current conflict involving Iran creates immediate commercial and legal challenges for companies operating in the Middle East. It directly affects contract performance, payment flows, shipping, energy supply and dispute resolution. In sectors such as energy, infrastructure, commodities and maritime transport, these impacts are already tangible, appearing in delayed deliveries, suspended operations, rising costs and arbitration claims.
This is one reason the current situation is highly relevant for international arbitration. Arbitration remains the preferred method for resolving cross-border commercial disputes in the region. Parties value its neutrality, confidentiality and enforceability outside domestic courts. At the same time, the Iran-related tensions now create disruptions that generate disputes. These include interference with trade routes, sharp price volatility, and pressure on long-term contracts. For businesses with regional exposure, it is no longer a question of whether geopolitics can affect performance. The issue is how those risks will be allocated when disputes arise.
I. Strategic Instability in the Strait of Hormuz and the Rise of Iran Conflict Arbitration Risk
Iran’s geographic position places it at the centre of global energy and shipping markets. The Strait of Hormuz, located between Iran and Oman, is one of the world’s most strategically important maritime chokepoints. Approximately twenty per cent of global petroleum liquids consumption passes through the Strait each day, which means that any disruption to this route immediately affects global energy markets and international trade.[1]
That commercial significance is already visible in market data. Recent reports show that oil prices surged sharply after attacks on shipping in the Strait of Hormuz. Brent crude oil rose above one hundred dollars per barrel as markets reacted to supply disruption fears.[2] In some instances, oil prices reportedly rose by more than twenty-five per cent as geopolitical tensions threatened the continued flow of energy through the Gulf region.[3] The broader financial impact is also visible. For instance, major global equity indices have declined while energy prices have risen amid concerns that the conflict could disrupt key trade routes.[4]
For international arbitration, these figures are relevant because they highlight the types of disruption tribunals may be required to evaluate, including whether a geopolitical event has caused commercial disruption, the foreseeability of resulting losses and the quantification of damages. Market indicators such as sharp increases in oil prices, volatile shipping costs or fluctuations in energy-related equities may therefore become relevant evidence in disputes concerning delayed deliveries, supply interruptions or the valuation of losses. In this way, recent market developments illustrate the growing arbitration risk associated with the conflict involving Iran.
The same dynamic is visible in maritime insurance markets. Maritime insurers have reportedly withdrawn or significantly increased war-risk coverage for vessels operating near the Strait of Hormuz as tensions involving Iran have escalated.[5] In some cases, war-risk insurance premiums for vessels transiting the Persian Gulf have reportedly increased by more than one thousand per cent, dramatically increasing the cost of transporting energy supplies through a corridor responsible for roughly one-fifth of global oil supply.[6]
This level of cost escalation is the type of development that leads to disputes. Sellers may argue that performance became legally or commercially impossible, while buyers may contend that price risk and transport disruption were already allocated in the contract. Shipowners, charterers, insurers and traders may seek to shift losses through force majeure, hardship, off-hire or termination clauses.
II. Force Majeure Will Remain Central to the Iran Conflict Arbitration Risk
Force majeure will likely be central in disputes arising from the current conflict. Although often standard in commercial contracts, force majeure clauses serve an important function: they allocate the consequences of extraordinary events beyond the parties’ control. When properly invoked, such clauses may excuse a party from liability for non-performance. Events such as war, political upheaval, natural disasters, or government actions may render performance impossible or fundamentally impede the performance of contractual obligations.[7]
In international commercial practice, force majeure and hardship doctrines are specifically designed to address the legal consequences of unexpected events or significant changes in circumstances affecting contractual performance, particularly in long-term cross-border agreements where the economic assumptions underlying the contract may shift dramatically.[8]
In practice, the doctrine operates as a contractual risk-allocation mechanism rather than a general escape from liability. Tribunals, therefore, approach force majeure arguments cautiously. The key legal questions usually concern causation, foreseeability and mitigation.
The requirement of causation means that the party invoking force majeure must demonstrate that the event genuinely prevented performance. This principle was emphasised in Tennants (Lancashire) Ltd v G.S. Wilson & Co Ltd [1917], where the House of Lords held that a mere rise in price does not amount to prevention or hindrance of delivery, but that the clause may apply where war creates a genuine shortage that interferes with the seller’s ability to supply.[9] More recently, the English Court of Appeal in Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] held that where a force majeure or exceptions clause provides that a failure to perform must “result from” a specified event, the party relying on the clause must establish a causal link between the event and the non-performance. In other words, it must show that it would have performed the contract but for the event.[10]
Tribunals may also examine whether the disruption was foreseeable when the contract was concluded. In The Sea Angel [2007] EWCA Civ 547, the Court of Appeal explained that the doctrine of frustration requires a multi-factorial analysis taking into account the terms of the contract, the surrounding circumstances and the parties’ allocation of risk.[11] Although the case concerned frustration rather than force majeure, its reasoning highlights the central role of contractual risk allocation when assessing the legal consequences of supervening events. This approach is reflected in Davis Contractors Ltd v Fareham UDC [1956] AC 696, where the House of Lords held that a shortage of labour and materials did not frustrate the contract, emphasising that such difficulties were foreseeable and could have been the subject of express contractual stipulation but were not.[12] In the context of force majeure, the same logic applies: where a disruptive event was reasonably foreseeable at the time of contracting, tribunals may be reluctant to interpret a force majeure clause as relieving the parties from risks that could have been expressly allocated in the contract. Together, these authorities suggest that foreseeability plays an important role in determining whether a supervening event falls within the contractual allocation of risk.
Mitigation is equally important. Where a clause requires the parties to use reasonable endeavours to avoid or circumvent the relevant event, the party invoking force majeure must demonstrate that such efforts were undertaken. This was emphasised in Seadrill Ghana Operations Ltd v Tullow Ghana Ltd [2018] EWHC 1640 (Comm), where the High Court held that the invoking party bears the burden of proving on the balance of probabilities that there was nothing it could reasonably have done to avoid, circumvent, or mitigate the effects of the force majeure event.[13]
Force majeure also has clear limits. Arbitral practice illustrates this particularly where the alleged disruption reflects economic hardship rather than circumstances preventing contractual performance. For instance, in Cessna Finance Corporation v Gulf Jet and Others (ICC Case No. 18769), the tribunal rejected a force majeure defence based on adverse economic conditions and financial difficulties, emphasising that economic hardship alone does not usually excuse performance unless the contract expressly allocates that risk.[14]
This case law demonstrates the legal complexity of the situation. A sharp rise in war-risk premiums, a sudden oil price spike or a temporary refinery shutdown may indicate serious disruption. Still, these facts do not automatically resolve the contract question. Tribunals will examine whether performance was genuinely prevented by the specific event relied upon and whether the affected party took reasonable steps to mitigate the consequences. These issues are likely to be central in arbitration disputes arising from disruptions associated with the conflict involving Iran.
III. Where Disputes Are Likely to Arise
The commercial consequences of the conflict are unlikely to remain confined to Iran. Disputes are likely to arise across the network of states and industries connected to Gulf energy production, shipping routes and industrial supply chains.
Energy infrastructure in Gulf states is one obvious source of disputes. Reports indicate that attacks on energy infrastructure and shipping routes have forced several producers in the region to halt or reduce production, while facilities suspend operations due to security risks and logistical constraints.[15] For instance, Qatar temporarily halted liquefied natural gas production and declared force majeure after drone attacks on its energy infrastructure,[16] while Bahrain’s state energy company declared force majeure on certain oil shipments following an Iranian strike that caused a fire at its Bapco refinery.[17]
These developments are significant because the Gulf region is deeply integrated into global industrial supply chains. For instance, Gulf producers account for approximately nine per cent of global aluminium production and a particularly large share of internationally traded aluminium.[18] Disruption in this region, therefore, has ripple effects that extend well beyond the energy sector into construction, automotive manufacturing and global metals markets.
As a result, disputes may arise across a wide range of contractual relationships. Long-term Liquefied Natural Gas supply agreements may be affected if production facilities suspend operations. Shipping disputes may occur if vessels are unable to transit the Strait of Hormuz or if insurers withdraw coverage. Commodity trading contracts may be affected if suppliers cannot deliver metals or energy products at agreed prices. Construction and infrastructure projects may face delays if materials sourced from the Gulf become unavailable.
In each of these contexts, the underlying legal question is whether the disruption caused by the conflict falls within the contractual allocation of risk between the parties. The scale of these interconnected supply chains means that disputes arising from the current situation are unlikely to be limited to a single industry. They may arise simultaneously across shipping, energy, commodities and infrastructure projects. This interconnected exposure makes the present situation a significant arbitration risk for companies operating in international markets.
IV. What Should Companies Do Now?
Companies with exposure to the Gulf region should approach Iran conflict arbitration risk primarily as a matter of contractual risk management rather than a purely geopolitical concern. Conducting an early legal review of force majeure clauses, governing law provisions, and the chosen arbitral seat may help reduce potential exposure if disputes arise.
For in-house counsel and commercial decision-makers, the practical implication is clear. Contracts that once appeared routine may now determine how the financial consequences of geopolitical instability are allocated between the parties. Addressing these contractual issues at an early stage may prove decisive if disputes arising from the current conflict ultimately reach arbitral tribunals.
Conclusion
The conflict involving Iran is translating into concrete commercial disruption. Instability in the Strait of Hormuz, rising energy prices and insurance volatility are already affecting the performance of international contracts across energy, shipping and commodity supply chains. As these pressures move through global markets, disputes over force majeure, delayed performance, and contractual risk allocation are likely to become more frequent.
Experience from previous global crises suggests that large-scale geopolitical disruptions often lead to waves of international arbitration, as parties seek to determine whether performance was genuinely prevented, whether contractual risk was properly allocated and how financial losses should be distributed between the parties.[19]
As tensions surrounding Iran continue to affect global energy and shipping markets, careful contractual review and early legal planning will be essential, not only to manage commercial disruption but also to prepare for the growing likelihood that these disputes will ultimately be resolved in international arbitration.
If you require assistance in relation to an international arbitration or disputes arising from geopolitical disruption in the Gulf region, please contact Aceris Law for more information.
[1] Bruno Venditti, Mapped: The World’s Oil Chokepoints, Visual Capitalist, 5 March 2026, https://www.visualcapitalist.com/mapped-the-worlds-oil-chokepoints/ (last accessed 12 March 2026).
[2] A. Kumar, Oil over $100: How the Strait of Hormuz crisis is shaking the global economy, Business Standard, 9 March 2026, https://www.business-standard.com/world-news/iran-conflict-oil-shock-strait-of-hormuz-global-economy-126030900560_1.html (last accessed 12 March 2026).
[3] A. Maitreya, Oil Prices Surge Over 25% As Iran War Disrupts Supply Near Strait Of Hormuz, International Business Times, 9 March 2026, https://www.ibtimes.sg/oil-prices-surge-over-25-iran-war-disrupts-supply-near-strait-hormuz-84265 (last accessed 12 March 2026).
[4] T. Herzlich, Dow falls 450 points, US oil surges to $90 as Trump demands Iran surrenders, New York Post, 6 March 2026, https://nypost.com/2026/03/06/business/dow-falls-560-points-us-oil-surges-to-90-as-trump-demands-iran-surrenders/ (last accessed 12 March 2026).
[5] E. Chow and J. Lerh, Marine Insurers Cancel War Risk Cover as Iran Conflict Escalates, Insurance Journal, 2 March 2026, https://www.insurancejournal.com/news/international/2026/03/02/860022.htm (last accessed 12 March 2026).
[6] MI News Network, Maritime Premiums Surge As U.S-Iran War Widens To The Mediterranean Region, Marine Insight, 7 March 2026, https://www.marineinsight.com/shipping-news/maritime-premiums-surge-as-us-iran-war-widens-to-mediterranean-region/ (last accessed 12 March 2026).
[7] ICC, ICC Force Majeure and Hardship Clauses, March 2020, pp. 1-2.
[8] K. P. Berger and D. Behn, Force Majeure and Hardship in the Age of Corona: A Historical and Comparative Study, 6 McGill J. Disp. Resol. 79, p. 78 (2019–2020).
[9] Tennants (Lancashire) Ltd v G.S. Wilson & Co Ltd [1917] AC 495, pp. 526, 530.
[10] Classic Maritime Inc v Limbungan Makmur Sdn Bhd [2019] EWCA Civ 1102 [15], [19], [48]–[49].
[11] Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The Sea Angel) [2007] EWCA Civ 547, [2007] 2 Lloyd’s Rep 517 (CA) [111].
[12] Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (HL), pp. 15–16, available at: https://www.bailii.org/uk/cases/UKHL/1956/3.html
[13] Seadrill Ghana Operations Ltd v Tullow Ghana Ltd [2018] EWHC 1640 (Comm), ¶¶ 83, 97.
[14] Cessna Finance Corporation v. Gulf Jet LLC, Khalid Mohammad Saeed Al Mulla and Hussein Mohamed Salem Al Meeza, ICC Case No. 18769/VRO/AGF, Final Award, 17 January 2014, ¶¶ 131–136.
[15] D. McHugh, Iran war puts at risk key pipelines, terminals and refineries that supply the world with oil and gas, AP News, 9 March 2026, https://apnews.com/article/oil-gas-infrastructure-iran-war-persian-gulf-24c4b439d2c6a5b571fea90e4d1227d8 (last accessed 12 March 2026).
[16] J. Mesa, What Is Force Majeure? Gulf Companies Shut Down Oil Production, Newsweek, 6 March 2026, https://www.newsweek.com/what-is-force-majeure-gulf-companies-shut-down-oil-production-11637203 (last accessed 12 March 2026); U. Hajdari, Bapco declares force majeure as Iran sets Bahrain’s only refinery ablaze, Euronews, 9 March 2026, https://www.euronews.com/business/2026/03/09/bapco-declares-force-majeure-as-iran-sets-bahrains-only-refinery-ablaze (last accessed 12 March 2026).
[17] U. Hajdari, Bapco declares force majeure as Iran sets Bahrain’s only refinery ablaze, Euronews, 9 March 2026, https://www.euronews.com/business/2026/03/09/bapco-declares-force-majeure-as-iran-sets-bahrains-only-refinery-ablaze (last accessed 12 March 2026).
[18] A. Al-Faki, Middle East tensions prompt Gulf aluminum producers to temporarily stockpile output, Arab News, 3 March 2026, https://www.arabnews.com/node/2635113/business-economy (last accessed 12 March 2026).
[19] K. P. Berger and D. Behn, Force Majeure and Hardship in the Age of Corona: A Historical and Comparative Study, 6 McGill J. Disp. Resol. 79, pp. 79–80 (2019–2020).
