Force majeure considerations arising out of the current conflict in the Middle East

The ongoing conflict in the Middle East - particularly the closure of the Strait of Hormuz and strikes on oil and gas facilities in the region - has triggered a wave of force majeure (FM) declarations across the global oil, gas, petrochemical, and metals industries. These disruptions are affecting companies at every level of the supply chain, from upstream state‑owned producers to downstream refiners, manufacturers and consumer facing suppliers.

In the first days of the conflict, FM declarations emerged from the Gulf’s state‑owned energy giants, whose facilities and export routes were directly affected by Iranian strikes. QatarEnergy – responsible for roughly one‑fifth of global LNG supply – was the first to move on 4 March. Kuwait Petroleum Corporation followed and Bahrain’s Bapco Energies followed shortly thereafter, citing a shortage of available shipping capacity through the Strait of Hormuz, prompting it to halt crude and product exports and reduce output. More recently, Iraq has declared FM on all oilfields developed by foreign oil companies, halting most of the country's crude exports.

The FM declarations arising from the conflict have not been confined to the Middle East, with a domino effect on companies from Europe to Asia being impacted by conflict-linked disruptions to their supply chains. Multiple petrochemical and refining entities have  invoked FM due to severe interruptions in feedstock and shipping routes. In Singapore, Aster Chemicals and Energy declared FM following significant disruption to raw material shipments stemming from the conflict, describing the move as administrative but necessary to address supply limitations. Other operators in Asia - including Indonesia’s Chandra Asri and South Korea’s Yeochun NCC (YNCC) – have also issued FM notices as supply from the Middle East becomes increasingly constrained.

In this blog post, we will explain the key legal and commercial considerations underpinning FM and identify a number of practical tips that can place affected companies in the best possible position vis a vis their counterparties.

The legal considerations

FM is a largely contractual mechanism that relieves one or both parties from liability for failing to perform their obligations when performance is prevented by unforeseeable events that are beyond their reasonable control. Typical examples include war, terrorism, natural disasters, strikes, or government intervention. Under English law, force majeure is a matter of contract: a party can only rely on force majeure if the contract expressly contains such a clause and defines the events that trigger it. As a result, the precise wording of the clause is critical and often determines whether relief is available. In many of the Gulf states, being civil law jurisdictions, there is a level of FM related protection provided through statute. However, the statute tends to provide the 'guardrails' for the mechanism, and ultimately the agreement of the parties typically remains the predominant consideration. 

FM clauses will often contain a list of qualifying events and specify the level of delay, disruption or, in some cases, impossibility required to trigger the clause. Courts will tend to rely on the exact wording of an FM clause in determining the availability of relief, which makes these lists critically important. The more specific and comprehensive the wording, the stronger the basis for an FM claim in periods of conflict‑driven disruption (or conversely the stronger the grounds to reject a poorly substantiated claim). Some clauses will also require that performance be “prevented,” which sets a high threshold, while others require only that performance be “hindered” or “delayed.” The choice of wording can significantly affect the extent to which a party is able to rely on the clause in practice.

Even where a relevant event occurs, the contractual relief offered by force majeure is rarely automatic. In addition to the requirement that the event in question falls within the scope of the clause, there must also be a clear causal link between the event and the failure to perform: the event must genuinely prevent or significantly impede the party’s ability to carry out its contractual obligations. Secondly, the event must generally be beyond the party’s control and not the result of its own conduct. To this end, there is typically an obligation for affected parties to seek to mitigate the impacts of any event giving rise to FM. This obligation is implied as a matter of English law and, while not implied in the Gulf, may fall within scope of the general civil law obligation to implement contracts in good faith. 

Where successfully invoked, a force majeure clause typically suspends some or all contractual obligations (in the UAE, the Civil Code expressly provides for partial suspension where impossibility does not affect all obligations) for the duration of the event and shields the affected party from liability for breach. Many clauses also allow for extensions of time or, if the disruption persists beyond a defined period, permit one or both parties to terminate the contract. If relied on successfully, FM clauses are a powerful contractual mechanism to mitigate the inherent unpredictable risks of international business. For this reason, courts tend to construe FM clauses strictly, and a contract becoming merely more expensive or commercially unattractive to perform will rarely be sufficient unless the clause expressly provides otherwise.

The risks of declaring force majeure

Despite the powerful relief that FM clauses can provide, declaring FM is never without legal and commercial risk. FM can expose businesses to several pitfalls if relied upon incorrectly or too narrowly.

Increased cost alone rarely justifies non‑performance. In the context of the current conflict, while upstream suppliers may experience direct disruption - for example, where production facilities are directly affected by the conflict - parties further downstream may still be able to obtain substitute supplies from alternative sources, albeit at a significantly higher price. Producers directly affected by hostilities or shipping disruptions may be able to demonstrate that their ability to export crude has been impeded, yet counterparties further along the trading and refining chain may find it more difficult to rely on the same argument where crude oil remains available on global markets, even if the price has increased significantly. This may pose risks for downstream entities, including state-owned energy companies, that have already declared FM in light of the conflict. 

Many contracts contain FM carve‑outs, such as specifying FM only for conflict occurring in a particular country. If disruption arises from a related but geographically distinct event, a business may be impacted operationally but unable to invoke FM. The breadth of examples listed in an FM clause influences interpretive scope, meaning narrowly drafted provisions may fail to address the current geopolitical disruption. 

Parties may also face risks arising from contractual misalignment across supply chains. Commercial contracts are often not fully “back‑to‑back,” meaning that the FM protection available under one agreement may not flow through to downstream contracts. Where a supplier declares FM but its buyer does not benefit from equivalent wording in related contracts further down the supply chain, the buyer may remain exposed to claims for non‑performance for which it has no contractual coverage. 

Last, there is a reputational risk that must be considered. While in the current circumstances, the cause of an FM declaration will be clear, the decision to invoke FM so publicly would nonetheless have been extensively weighed. Investors and counterparties outside the Middle East will be keenly watching current events, and prolonged events of FM risk signaling underlying instability and could lead to some parties taking steps to source oil and gas from other oil producing regions outside the Middle East.

The considerations under finance documents

In the context of finance documents, borrowers should promptly assess several implications following the occurrence of a force majeure event, including impacts on reporting, representations, covenants, and potential default triggers. Key considerations include:

Notification requirements

Borrowers are generally required to notify lenders promptly—often within a specified number of days—detailing the nature of the event, its expected duration, its anticipated impact on their ability to perform contractual obligations and details of any mitigation undertaken by the borrowers. These notices may need to be supported by evidence and followed by regular updates as the situation evolves. If relevant notices are given under the project documents to the offtaker or other project participants, lenders will need to be informed of those notices as well.

Restrictions on waiving FM related claims

Finance documents commonly prohibit borrowers from agreeing to or permitting any waiver of natural or political force majeure claims under project documents without the lenders' consent. 

Borrowers may therefore need to involve lenders in discussions with procurers or other counterparties before agreeing to any position that may affect such claims.

Repeating representations

Repeating representations often confirm that no force majeure event affecting performance has occurred. If it has become inaccurate, it may give rise to a misrepresentation Event of Default, requiring early review and disclosure to lenders.

Potential Material Adverse Effect

Force majeure events may also fall within the scope of a Material Adverse Effect definition, depending on their severity and impact. MAE definitions in project finance transactions often refer to events or circumstances that materially and adversely impair the implementation of the project or the ability of the company or key project parties to perform material obligations under the transaction documents. If the force majeure event meets this threshold, it may trigger separate MAE related notification requirements and could give rise to a Potential Event of Default.

DSCR model run

Given that a force majeure event may affect the project’s cash flows, and therefore its ability to meet its debt service obligations, a DSCR re-calculation may be requested by lenders to understand whether the FM event materially affects projected cash flow.

Given the cross impact of these provisions, early coordination with lenders is typically essential to preserve contractual protections and avoid technical defaults.

Practical steps for parties impacted by FM

Review the FM clause

The first step for businesses that may be impacted by FM is to review the relevant FM clause and any related contractual provisions. The governing law of the contract is of fundamental importance in this regard. For contracts governed by English law, the availability of FM protection is entirely dependent on the wording of the clause; without it, parties may need to rely on frustration, which applies only where performance has become genuinely impossible. For contracts governed by other laws, for example UAE law, parties may be entitled to suspend, delay or excuse performance on the basis of statutory provisions even where the contract does not contain an express FM clause. In this scenario, legal advice should be obtained on the applicable statutory provisions.

Issue timely and detailed notice

For parties seeking to rely on an FM clause, notices must be issued strictly in accordance with the contract. Many contracts impose short deadlines to notify FM claims. Main contractors and subcontractors cannot assume that an FM declaration by an employer or state‑owned entity automatically flows through the supply chain; each tier must give its own notice and demonstrate a causal link between the FM event and its inability to perform. FM clauses also require prompt notification as a condition precedent to relief, and failure to comply may forfeit the entitlement entirely, particularly where the contract is governed by English law, which typically adopts a hardline approach on time bars. 

Take steps to mitigate

It is common for valid declarations of FM to be contingent upon the declaring party having taken all reasonable steps to mitigate the impact of the disruption. English courts have gone as far as to imply this obligation even where it is not expressly provided for in the contract and in the Gulf a failure to mitigate may run afoul of the core principle of good faith. Mitigation typically includes exploring alternative supply routes, adjusting work programmes, coordinating with subcontractors, and carefully documenting all steps taken. Contracting parties should maintain detailed contemporaneous records of logistical delays, restrictions, and procurement difficulties, in addition to a record of any steps taken to overcome these issues.

Review insurance policies

Insurance is another key area that should form part of any early risk assessment. Businesses with assets, operations, or logistics within or connected to affected regions should review their insurance programmes promptly to determine whether any coverage may apply. While war risks are typically excluded from standard commercial property and business interruption policies, such risks are often insured separately under standalone war risk policies. Depending on the insurer and policy wording, extended political violence cover may also respond to losses arising from certain war or civil war scenarios. In addition, political risk insurance may provide protection where government actions taken during a conflict - such as expropriation, asset seizure, or currency restrictions - cause financial loss, although these policies may themselves contain war or related exclusions that need careful review. Businesses should also be alert to potential changes to their existing cover. In periods of escalating conflict, insurers may seek to issue notices of review, modification, or cancellation in respect of war-related risks, which can require prompt action to preserve coverage or arrange alternatives.

As the conflict continues to reshape global energy and commodities markets, FM declarations are likely to remain a prominent feature of commercial relationships. Businesses should act proactively: understand their contractual protections, assess their operational exposure, comply meticulously with notice and mitigation requirements, and review their insurance position. In a fast‑moving landscape, early and informed action remains the best safeguard against escalating legal and commercial risk.