How the Middle East crisis is exposing the limits of force majeure clauses
April 2026
A rose by another name: is it coverage at all?
There is a quiet confidence among those who deal with commercial and construction contracts: they believe that a force majeure clause is a reliable backstop against the unthinkable. The clause is there. It mentions war. It mentions catastrophe. That should be enough. The conflict now unfolding in the Middle East tests that confidence. For many firms, that test is an uncomfortable one.
Since targeted military operations by the USA and Israel against Iranian military installations began in February 2026, the commercial landscape has shifted dramatically. Passage through the Strait of Hormuz, one of the world’s busiest thoroughfares for cargo and energy, has become dangerous and sometimes impossible. Commodity markets are experiencing volatility that compresses margins and destabalises project budgets. Almost overnight, logistics networks built up over decades are being rerouted. In London, Singapore, Frankfurt, and New York, in-house lawyers and advisers are doing the unthinkable: meticulously reading force majeure clauses previously left unread in the fine print.
This is no easy read. The clause speaks of “war”. But is what is playing out in the Middle East a war? It is unclear whether there has been a declaration of hostilities in the old-fashioned sense. The executive of the US authorized the operations. The US legislature has not been engaged in a way that one might have expected. There is no easy answer to the question whether a judge or arbitrator would decide that the clause is triggered. As always, the answer depends on the precise wording of the clause, the applicable law, and the specific circumstances of a case. In a properly constructed agreement, that ambiguity would not exist. The fact that it does is a failure of the drafters.
What is unfolding in the Persian Gulf is not a unique catastrophe. It is the most recent in a long line of crises that have exposed the same structural inadequacy. The pandemic of 2020 produced a wave of force majeure disputes. The conflict in Ukraine disrupted energy, agriculture, and financial markets. And yet, when lawyers sat down to draft the next round of contracts, the language they reached for was the same language they had used before. The current crisis is the result of that collective failure to learn.
Precision rather than generosity: what force majeure actually provides
Any rigorous discussion of force majeure must begin by unsettling a persistent misconception: the clause does not function as a broad and all-encompassing safety net, stretched out to catch anyone in the jaws of difficulties. Courts across jurisdictions have been consistent on this point. A force majeure clause gives succour where a specified event has made performance impossible, not merely harder, not merely less profitable, not merely politically or reputationally inconvenient. In practice, the line between impossibility and hardship is not always easy to draw, but that it exists is certain.
This creates tension with commercial reality . The developments that most frequently push firms toward invoking force majeure – unexpected spikes in the cost of raw materials; the breakdown of a critical logistics route; a sharp worsening in financing conditions – seldom cross the threshold from hardship into impossibility. A manufacturer able to source the required components at a price that decimates its operating margin, is still expected to perform. The clause was not designed to protect firms against bad economic outcomes. It was designed to protect them against physical impossibility.
The requirement that there be causation adds more complexity that is often underestimated in the drafting stage. A party seeking to invoke a force majeure clause must do more than point to a dramatic event somewhere in the world. It must establish a credible and direct causal link between that event and its specific failure to perform. Where a vessel carrying essential materials cannot complete its transit through a conflict zone, the link is close and direct. Where the complaint is that a technology firm in Munich has higher data-centre energy costs because oil prices have risen in response to events on a faraway continent, the causal chain is long and has many links. Courts will examine every link skeptically.
This does not mean force majeure clauses are useless. It means they should be drafted with care and specificity. Every effort must be made to ensure that the protection they offer reflects the real risks the contracting parties face, rather than a generic set of risks inherited from agreements written in different commercial conditions.
The knock-on effect: firms far from the front lines
Of the most striking features of the current crisis is the breadth of firms materially affected despite having no presence in the region, no counterparties based there, and no direct exposure to the conflict itself:
- a steel producer reliant on supply chains through Gulf ports
- a fertiliser-dependent agricultural processor watching input costs spike
- a European utility whose power purchase costs double within two months.
Those firms all have one thing in common: they are absorbing the economic consequences of a geopolitical event that is, in a physical sense, thousands of kilometres from their operations.
This is the dimension of modern risk that conventional force majeure drafting does not address adequately. The standard clause poses a simple question: did a specified event occur, and did it prevent performance? It rarely asks the more commercially significant question: did the economic ripples generated by that event, spreading out through interconnected global markets over weeks and months, impair a party’s ability to perform a contract that has no obvious connection to the event itself?
Under the canon of construction eiusdem generis, a general or catch-all provision in a force majeure clause is construed in the light of the specific events that surround it. Where those specific events are all physical and direct – fires, floods, earthquakes, acts of war – a catch-all provision will rarely be interpreted to extend to the secondary and tertiary economic consequences of geopolitical instability, however severe or prolonged the consequences may be. Absent careful drafting, the manufacturer seeing its steel costs soar will not be in the same position legally as the firm whose plant has been razed to the ground in a natural disaster.
In principle, this distinction is not unreasonable. But it causes results that parties often fail to anticipate at the drafting stage. This is so since, when negotiating contracts, the focus tends to be on the banner events – the dramatic and the visible – rather than on the quieter but equally devastating chain of economic consequences that those events set in train. The resulting mismatch between contractual expectation and contractual reality is not hypothetical. It is experienced in real time, by real firms, right now.
Three types of risk that standard clauses usually miss
- Commodity and energy-price disruption Energy markets responded to the February 2026 military strikes on Iran with immediate and emphatic volatility. Oil prices shot up in the days after the initial operations. Ongoing uncertainty over access to the Strait of Hormuz means there has been no return to stability. For firms in energy-intensive sectors, from heavy industry to large-scale logistics, the practical outcome is real: it is a sustained, material increase in operating costs that was not modelled at the time contracts were signed.
Conventional force majeure drafting gives such firms little solace. The clauses rarely identify energy-price volatility as a trigger. Even where a catch-all provision might be invoked, the impossibility standard defeats most arguments: a firm paying three times its contracted-for energy costs suffers acutely. But, in most cases, it is not prevented from performing. Parties in commodity-sensitive and energy-intensive sectors need clauses that address this type of risk, specifying whether, and at what threshold, cost escalation of this magnitude can engage the clause.
- Logistics and supply-chain breakage
The disruption to global shipping caused by the current conflict is both immediate and cascading. Major carriers have suspended or rerouted services. Conflict-related surcharges are being applied and passed through supply chains. For construction and manufacturing firms, the consequences extend beyond cost: they include schedule disruption, exposure to liquidated-damages provisions, and knock-on delays across interconnected project programmes not designed to absorb this kind of shock.
Here, the drafting challenge is the indirectness of the causal chain. The conflict creates shipping disruption. That, in turn, creates material shortages. The material shortages create construction delays. At every link, the distance between the force majeure event and the specific performance failure gets bigger, and the argument for relief becomes harder to sustain. Contracts that focus on the originating event without addressing the downstream chain of consequences leave parties without protection at precisely the points where protection is most needed.
There is also a practical complication that current conditions are making concrete: as supply chains strain, more and more contractors must procure and store materials well in advance of need, to secure availability before routes close or prices rise further. The costs of early procurement, storage, and additional insurance are real and significant. Standard force majeure clauses say nothing about who bears them.
- Capitalwithdrawal and financing risk
Perhaps the most overlooked risk is the withdrawal of capital. Reports from across the market indicate that sovereign-wealth funds and institutional investors with connections to Gulf economies are reviewing and sometimes withdrawing from overseas investment commitments. For growth-stage firms and project-finance structures that depend on continued committed investment to meet operational milestones, this is not a theoretical risk. A withdrawn funding round can make contractual performance impossible just as surely as a blocked shipping route.
This category of risk is furthest from the traditional force majeure paradigm. The clause was conceived to address the direct effects of dramatic physical events, not the decision of a risk committee in Riyadh to reassess its exposure to European infrastructure assets because of regional political instability.
Whether this kind of financial disruption is better handled through a force majeure provision, a material-adverse-change clause, or some other mechanism is a question that drafters must now engage with directly, rather than leaving it to be resolved by courts.
A framework: Seven principles for better force majeure clauses
The following principles are not suggested as a mainstay of all contracts without contextual adaptation. Force majeure drafting is context-sensitive. What is appropriate for a long-term infrastructure concession differs materially from what belongs in a short-term commodity-supply agreement. What the principles offer is a framework for discussion.
First: Draft with reference to consequences, not only causes
The impulse to define force majeure by listing causes, war, terrorist acts, natural disasters, governmental interventions, is understandable. But it is not enough. The current crisis demonstrates that the decisive question is not whether a specified cause has materialized, but whether the consequences of that cause have rendered performance impossible or materially impaired.
A clause that names war without addressing the downstream effects of war – whether energy market disruption, supply chain collapse, or capital market dislocation – will generate precisely the arguments about causation that the parties will have in arbitration rooms in months to come. Express language extending the clause to indirect and consequential effects of triggering events is now a necessity, not a refinement.
Second: Abandon the falsehood that ‘war’ is self-defining
Modern armed conflict rarely arrives in the form that historical contract language was written to address. Formal declarations of war are rare. State-on-state hostilities increasingly exist alongside the involvement of non-state actors, proxy forces, and hybrid operations that blur established categories.
If the contracting parties intend the clause to respond to armed conflict in any of its contemporary forms, the clause must say so. If they intend a narrower scope, they must define it. In and of itself, the word “war” is no longer a reliable descriptor of the risks it is supposed to address.
Third: Construct the catch-all with intention
A catch-all provision serves the very function its name suggests: it should catch risks that the specific enumerated events have not captured. But its scope is not unlimited. Under ejusdem generis, a court will read the catch-all as extending to events of the same type as those explicitly listed alongside it. A catch-all following a list of natural disasters will reach other natural disasters, not geopolitical risks.
If the parties want the catch-all to be a meaningful safety net against economic dislocation, political risk, or market disruption, the specific events list must include at least some events of those types. The construction of the specific list determines the reach of the general provision.
Fourth: Confront the cost question directly
The default legal position, namely that increased cost alone does not excuse performance, reflects a considered policy choice about the allocation of commercial risk. But it is a default, not an immutable rule. Parties are free to agree that cost increases above a defined threshold, or above a defined percentage of a baseline, are sufficient to engage the clause.
In sectors marked by high commodity exposure, long project timelines, and significant price volatility, such provisions are not only reasonable but commercially necessary. The contract should specify what relief becomes available and in what form: a right to suspend, a right to renegotiate price terms, a right to terminate. These are not questions to leave for a judge.
Fifth: Specify the path back to performance
Many force majeure clauses address the triggering of relief with reasonable care but then go on to say nothing meaningful about what happens next. The current conflict, which shows no credible signs of rapid resolution, makes the questions that arise during and after a sustained force majeure event urgently practical:
- When does a suspension of obligations become a right to terminate?
- Who bears the costs that accrue during the suspension period?
- Are payment obligations merely deferred, or suspended entirely?
- Does the affected party acquire additional time to perform once the event has passed, or does the original schedule resume?
The contract must answer these questions. Silence is not neutral; it is an invitation to litigation.
Sixth: Ensure consistency across the contractual structure
Commercial projects rarely involve only two parties. A development project might involve an owner, a main contractor, several sub-contractors, lenders, and a concession entity, each bound by different agreements with different force majeure provisions.
Where relief flows to the main contractor under the principal contract but not from the main contractor to sub-contractors under their respective agreements, the result is not the resolution of risk but its displacement. The sub-contractor absorbs the consequences that the clause at the top of the chain has redirected downward.
Ensuring coherence across the contractual structure of any transaction is not a refinement. It is a basic precondition of the clause operating as intended.
Seventh: Design procedures for realistic conditions
The procedural provisions of a force majeure clause, notice requirements, mitigation obligations, record-keeping obligations, are frequently the provisions that collapse first in a genuine crisis.
Notice deadlines that assume orderly circumstances may be impossible to meet when operations are in chaos.
Mitigation obligations drafted in the abstract may demand the commercially unreasonable when tested against the specifics of a fast-moving disruption.
Record-keeping obligations that have never been followed in practice offer no evidential foundation when a party finds itself before a tribunal.
These provisions must be designed for the conditions under which they will be used: not orderly conditions, but crisis conditions.
Immediate steps for parties to existing contracts
The principles listed above are mainly to guide parties constructing new agreements. The more immediate concern for most firms is what they do about contracts already signed, obligations already in place, and disruption already being felt. The following steps are urgent and practical.
All contracts must be read closely and carefully. Their words must be considered in their terms – not from memory or from a summary prepared earlier. Specific words are fundamentally important. The difference between a clause requiring performance to be “prevented” and one requiring it to be “materially hindered” is vast.
It is the distinction between relief that is very difficult to establish and relief that may be available without establishing impossibility. The governing law matters: South African law; English law; the laws of Gulf jurisdictions. They all approach force majeure differently.
Where it appears that the clause might be engaged, notice must be given immediately. Under many agreements, the consequences of late or defective notice are severe: courts and tribunals have held that procedural non-compliance forfeits the right to rely on the clause irrespective of the merits. The operational pressure that a firm is under in a genuine disruption does not excuse procedural defaults.
If there is uncertainty about whether the clause applies, it is better to give notice and argue later.
Mitigation is both a legal obligation and an evidential necessity. A party that cannot show that it took all commercially reasonable steps to find alternative suppliers, reroute shipments, or otherwise limit the effect of the disruption will struggle to persuade a tribunal that performance was genuinely impossible. The question of what is commercially reasonable must be assessed in the light of the actual circumstances, including the cost and availability of alternatives; but the obligation exists, and it must be discharged and documented.
Renegotiation is almost always preferable to litigation, and the window for productive conversation is almost always shorter than parties assume. A commercially reasonable variation, one that shares the burden of current disruption equitably between the parties and reflects the reality that neither side anticipated these conditions, preserves relationships, preserves projects, and preserves value in a way that formal dispute resolution does not.
The firms that initiate these conversations early, before positions have hardened and losses have mounted, will be better placed than those who wait for certainty that may not arrive.
The contract must reflect the world in which it operates
There is a pattern in how the legal profession responds to crises that expose contractual inadequacy. The crisis arrives. The disputes follow. The commentary is written, the cases are decided, and the lessons are identified. Then, however, when the next round of contracts is drafted, the same language surfaces again, with the same gaps and weaknesses. The 2020 Covid pandemic generated more force majeure commentary than previous crises. The conflict in Ukraine reinforced the lessons. The crisis in the Middle East is reinforcing them again, with greater urgency.
The pattern recurs because drafting for real uncertainty is harder than it looks. It demands imagining not only the dramatic trigger event but also the quieter, more insidious results that flow from it: the rising cost of power, the delayed shipment, the withdrawn investment, the rerouted cargo. It requires defining with precision what the parties mean by the words they use. It requires building procedural mechanics that will function under pressure, not just under normal conditions. And it requires aligning the force majeure framework across every layer of a complex contractual structure, rather than treating each agreement as a self-contained document.
What the current conflict shows is that the risks which most threaten commercial performance in the modern global economy are not the direct and dramatic events that force majeure clauses name. They are the economic and logistical consequences of those events, propagating outward through interconnected markets and supply chains over days and weeks, affecting firms that have no direct connection to the precipitating event at all. A clause written to address these risks looks different from the standard forms. It asks harder questions, provides more specific answers, and requires more sustained thought at the drafting stage.
