Force Majeure in the Iran War: The Hidden Traps We Are Not Talking About (Yet)

Force Majeure Is Back—But the Real Exposure Is not the Clause. 

The Iran war has pushed force majeure out of the boilerplate and onto the GC’s dashboard. Disruption is showing up through shipping constraints, infrastructure impacts, energy volatility, insurer retrenchment, and sanctions/payment friction. The usual reminders still matter—narrow construction, strict notice, and credible mitigation—but these are table stakes, not strategy.

Most commentary stays in the predictable lane: does the force majeure (FM) clause say “war,” “embargo,” or “government action”? Was performance truly prevented? Was notice timely? Those questions are necessary—and they are where many teams stop. For GCs, the harder problem is decision quality: how the contract allocates risk, what alternatives exist, and what records will survive scrutiny when the counterparty, auditors, insurers, or regulators ask why performance has changed.

This conflict has caused many types of disruptions. It is simultaneously a shipping event, an insurance-market event, and a sanctions/compliance event—with knock-on effects that propagate through multi-tier supply chains and service ecosystems. That mix is what turns routine FM notices into allocation fights, covenant breaches, and termination or renegotiation pressure.

In practice, FM notices appear to have arrived in three waves—each driven by different operational facts and legal theories. Wave 1 followed the escalation and disruption around the Strait of Hormuz: upstream energy and commodities players declared FM where facilities were damaged, shut by government order, or unable to export due to vessel unavailability and security risk (publicly reported examples include Qatar Energy (LNG), Kuwait Petroleum Corporation, Bahrain’s Bapco Energies, and Aluminium Bahrain). Wave 2 emerged as downstream manufacturers and petrochemical producers outside the conflict zone lost feedstock, shipping capacity, or insurance coverage—leading to more contested notices that turn on causation and risk allocation (reported examples include Aster Chemicals and Energy (Singapore), Chandra Asri (Indonesia), and Yeochun NCC (South Korea)). Wave 3 is the contract-by-contract volume: voyage-, route-, and window-specific notices across shipping, logistics, and trading markets—often narrower than enterprise-wide shutdowns (including shipment-focused declarations like Aluminium Bahrain’s, alongside similar contract-level notices by carriers, traders, and logistics providers managing diversions and insurance constraints).

The points below flag where GCs should expect real friction—places where the facts, the clause, and the risk allocation typically diverge.

1. Loss of Insurance: When Coverage Withdrawal Is the Real Force Majeure 

In war-adjacent corridors, benefits of insurance can vanish overnight: war-risk premiums spike, exclusions expand, and certain voyages become uninsurable or commercially irrational. That is not just a cost issue—many contracts require maintaining specific insurance. If coverage is withdrawn, a party may face an immediate covenant breach even before any shipment is missed. 

• New York courts generally construe force majeure and impossibility narrowly and often treat insurance availability problems as foreseeable commercial risks unless the contract clearly allocates that risk. The classic signal is where an inability to procure required insurance did not excuse performance and was held outside the clause’s scope. 
• Texas law is contract-first as well, but many Texas-governed energy and logistics contracts are more explicit about operative risks and mitigation mechanics. Still, causation is critical: the coverage loss must actually prevent performance as the contract defines it. 
• English law adds a different twist: there is no implied doctrine of force majeure; everything turns on the clause language. Where the clause includes a reasonable endeavors requirement, courts will ask whether performance could be achieved by steps consistent with the contract—without rewriting the bargain. 
• In many civil-law systems, statutory force majeure concepts require unforeseeability and unavoidability; mere increased cost is usually not enough unless the effects truly prevent performance. Internationally, ICC/UNIDROIT-type clause structures often treat war and sanctions/embargo as paradigmatic events but still require proof that effects could not reasonably be avoided or overcome. 

2. Cascading Force Majeure: Supplier FM Is Not Automatically Your FM 

The next wave of disputes will be about pass-through. A producer declares force majeure; its buyer cannot manufacture; downstream customer gets a force majeure notice. The instinct is to treat these as dominoes. Contract law often does not. 

• Under New York law, the relying party typically must show the triggering event falls within the clause and directly prevented performance—supplier failure counts only if the clause includes inability to procure materials, supplier failure, or similar language. 
• Texas law also starts with the contract. Supplier disruptions generally must be listed. Even where they are, courts scrutinize whether the event caused the shortfall and whether reasonable efforts to mitigate were taken. 
• In English law, pass-through depends heavily on drafting. ICC-style clauses are instructive because they address non-performance by third parties explicitly and require conditions to be met for both the contracting party and the third party. 
• Civil law courts may be more open to recognizing third-party impediments if they meet statutory criteria, but they still expect proof that the effects could not be avoided (e.g., by sourcing elsewhere) and that the party did not assume the risk. 

3. Foreseeability Is not Binary Anymore: ‘Known Conflict’ vs ‘Unforeseen Consequences’ 

A recurring theme in disputes arising from all three waves is whether the risk was foreseeable. The better framing is often: which specific escalation consequence was not reasonably foreseeable at signing (e.g., route closures, targeted infrastructure strikes, insurance pullbacks, payment restrictions). 

• Under New York law, foreseeability is central and courts ask whether parties could have guarded against the event in the contract. 
• In Texas, foreseeability disputes often collapse into clause text plus causation: does the clause cover the category, and did it cause the nonperformance? 
• Under English law, foreseeability matters only to the extent the clause makes it part of the test; otherwise, the clause’s trigger words do most of the work. 
• In civil-law systems, foreseeability is frequently an explicit element of the statutory definition. 

4. Force Majeure vs. Price Adjustment vs. Hardship: Choosing the Right Tool 

Many force majeure disputes are really price disputes. Fuel costs jump, shipping reroutes add weeks, and inputs become scarce. 

• In common-law systems, ‘it got more expensive’ is usually a weak force majeure argument unless the contract says otherwise. 
• For long-term supply agreements, consider whether you have (or should negotiate) price adjustment, change-in-law, allocation, or hardship mechanisms. Internationally, UNIDROIT and ICC hardship frameworks provide structured renegotiation and adaptation pathways when performance is still possible but fundamentally more onerous. 

5. The Recipient’s Playbook: Use of FM Defects as Leverage (or as a Claim) 

Most guidance is written for the party invoking force majeure, but many disputes are driven by the recipient of a notice who believes it is defective or opportunistic. Common vulnerabilities include event not within the clause, weak causation, late notice, failure to mitigate, and continued performance suggesting performance was not truly prevented. 

• Under New York, narrow construction often makes these challenges potent. 
• Under Texas, causation-centric reasoning often decides cases. 
• Under English law, textual parsing (prevent vs hinder) and compliance with contractual wording, such as reasonable endeavors clauses, determine outcomes. 
• In civil-law systems, statutory tests and good-faith principles can influence the posture, but proof of avoidability can defeat the claim.

6. Sanctions Overlay: War Is not Always the Best Label—Illegality Often Is

In the Iran war context, parties may find that sanctions, export controls, payment restrictions, and regulatory actions—not physical hostilities—are what make performance unlawful or impracticable. The key is coordination in sequence: compliance covenants, illegality-based termination rights, and force majeure notices must be timed and framed to fit together. 

• In payment/currency disputes under English law, reasonable endeavors obligations if present in the contract can be pivotal; courts generally resist requiring a party to accept non-contractual performance as a workaround. 
• ICC-style clauses explicitly list sanctions, embargo, and currency restrictions as paradigmatic force majeure events, simplifying qualification while leaving causation/avoidability to proof.

7. The Long-Duration Problem: When Suspension Stops Making Sense 

Force majeure clauses often suspend obligations, sometimes with termination rights if the event persists. But conflicts can drag on, and what began as ‘temporary’ becomes indefinite.

• Civil-law statutes may provide clearer default consequences (temporary impediment→ suspension; permanent → termination). 
• Under English law, absent clear termination provisions, parties may look to frustration, but the threshold is high. 
• Under New York and Texas law, indefinite suspension arguments can be risky unless the clause clearly authorizes them; timing and causation may remain contested even after months of disruption.

The Winning Strategy Is Portfolio-Level, Not Clause-Level

The Iran war will drive force majeure claims and disputes, but outcomes will be decided in the surrounding deal architecture. The critical questions are not just commercial—they are the questions a court, tribunal, regulator, insurer, or auditor will ask after the fact: what risk the contract allocated, what alternatives were realistically available, what decisions were made in real time, and what record supports them. Focus less on whether “war” appears in the clause and more on causation, proof, and the way force majeure interfaces with insurance covenants, sanctions and payment restrictions, risk allocation provisions, and termination rights. The key is sequencing: compliance covenants, termination rights for illegality, and force majeure notices must align. Treat each notice as a controlled decision—stabilize performance where you can, reprice or reroute where you must, and exit where exposure is unmanaged—and document the file as if it likely will be reviewed in litigation or an enforcement proceeding.

Contact any of the WBD attorneys here for assistance with strategies to navigate your contractual obligations in these uncertain geopolitical times—including the execution of force majeure and other performance provisions.