Force majeure and the Iran conflict: Contract tools for managing war driven disruptions

Force Majeure is a longstanding legal doctrine which frees parties of their contractual duties when extraordinary, unforeseeable events occur. This can include natural disasters, wars, or even pandemics.

There has been a lot of focus on this legal doctrine due to the Iran war and related conflicts in the Gulf region.

1) Why this matters now

Since it began in February 2026, the conflict with Iran has produced disruptions that have spread quickly through global supply chains and capital markets due to the Persian Gulf’s key role in energy, shipping, and cross border trade. 

While the two-week cease-fire between the United States and Iran announced on April 7, 2026, will purportedly allow oil, gas, fertilizer, and other vessels to proceed undisturbed through the Strait of Hormuz, it does not permanently end the military operations in the region. The United States naval blockade of Iranian ports in the Strait of Hormuz, which took effect on April 13, 2026, will test the cease-fire, and could have the effect of further destabilizing shipping in the region. 

Disruptions caused by the conflict with Iran have already triggered force majeure declarations by major counterparties. They will likely lead to follow on disputes over non performance, delayed performance, pricing, allocation, and termination rights. 

In addition to large commercial supply contracts in sectors like energy production, fertilizers, and logistics, the Iran conflict has the potential to impact agreements and arrangements that are common to companies, individuals and families.  These could include imports, real estate transactions, private investments, art and asset logistics, bespoke travel and event contracts, and cross border wealth structures.

Against the current backdrop, parties large and small should evaluate whether their agreements’ force majeure provisions are implicated.  They should also consider whether related doctrines—such as frustration of purpose, impossibility, and (for UCC transactions) commercial impracticability—provide additional defenses or negotiating leverage where force majeure is unavailable or uncertain. 

2) Force majeure is a contract first inquiry

Force majeure is fundamentally a contractual remedy. There is no general, universally accepted doctrine or definition of force majeure. It typically excuses (or suspends) performance when an event beyond the parties’ control prevents performance. But it applies only to the extent that the parties agreed to it in the contract. 

Courts applying New York law, for example, commonly construe force majeure clauses narrowly. See, e.g., Reade v. Stoneybrook Realty, LLC, 63 A.D.3d 433, 434 (1st Dep't 2009) (holding that a judicial temporary restraining order falls within the meaning of the term “governmental prohibition” included in lease’s force majeure clause); see also JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118, 124 (2d Cir. 2022) (applying New York law and holding that the Covid-19 pandemic and orders issued by New York’s Governor which restricted nonessential businesses constituted “circumstances beyond our or your control”, which was included in contract’s force majeure clause)). Legal outcomes often turn on whether the event at issue falls within the clause’s enumerated events (or within the “same kind or class” as those events where the clause contains a catch all phrase).

Many contract clauses expressly include “war,” “armed conflict,” “hostilities,” “terrorist acts,” “civil unrest,” “blockade,” “embargo,” “governmental action,” or “orders of any governmental authority.” When those types of contract terms appear, the analysis typically becomes: (1) Did the relevant war related event actually prevent performance (see Kel Kim Corp. v. Cent. Markets, Inc., 70 N.Y.2d 900, 902–03 (1987)); (2) Did it do so for this party and this obligation (see id.); and (3) Did the party comply with all notice/mitigation conditions? See PT Kaltim Prima Coal v. AES Barbers Point, Inc., 180 F. Supp. 2d 475, 482 (S.D.N.Y. 2001).

Importantly, many agreements do not excuse performance simply because it has become more expensive or less profitable; they often require that performance be prevented, not merely made burdensome. See Urban Archaeology Ltd. v. 207 E. 57th St. LLC, 68 A.D.3d 562 (1st Dep't 2009) (holding that a lease’s force majeure clause, which contemplated either party's inability to perform its obligations under the lease due to “any cause whatsoever” beyond the party's control, did not encompass one party’s “financial hardship” as a result of downturn in the economy). See also Rochester Gas & Elec. Corp. v. Delta Star, Inc., 2009 WL 368508, at *7 (W.D.N.Y. Feb. 13, 2009) (noting that “financial difficulty does not, in and of itself, make out an impossibility defense” (quotation omitted)). 

3) What force majeure typically does (and does not) do

Giving notice that a party is invoking force majeure does not necessarily end the contract. Rather, many clauses simply suspend contract obligations for the duration of the force majeure event, extend deadlines, and/or excuse delay damages; and some agreements provide termination rights only after a defined period (e.g., 30/60/90 days). See PT Kaltim Prima Coal, 180 F.Supp.2d at 482. In many agreements, force majeure notice starts a process and causes parties to shift into allocation, partial shipment, or renegotiation regimes. 

Even if performance is excused under a force majeure notice, many force majeure clauses do not excuse payment obligations that are already due, and some expressly state that force majeure does not apply to the duty to make payment. See, e.g., A/R Retail LLC v. Hugo Boss Retail, Inc., 72 Misc 3d 627 (Sup. Ct., New York County 2021) (noting that force majeure clause under a lease carved out any “causes delaying the payment of money due and payable hereunder.”). Thus, it is advisable to separate: (1) delivery/production/service obligations from (2) invoicing and payment provisions.  It is also worth checking whether setoff, withholding, or price adjustment mechanisms exist elsewhere in the agreement. 

It is important to recognize that the issues discussed here apply specifically to the parties who signed the contract. When one party declares force majeure, it can create separate and unique challenges for other parties impacted by the contract, such as suppliers, customers, or other stakeholders further down the line. These downstream parties may face different legal and practical concerns resulting from the force majeure event.

4) Applying the framework to today’s disruption patterns 

With the ongoing war in Iran, we are seeing parties confront issues such as:

A. Energy supply, shipping constraints, and export chokepoints

Where contracts depend on Gulf production or transit, parties are assessing whether the combination of war related events and governmental actions that impede the supply chain (e.g., port restrictions, security zones, vessel routing constraints, insurer limitations, or sanctions compliance measures) “prevent” performance within the meaning of their contract clauses. 

B. Facilities damage and localized attacks

Where a facility incident is linked to the conflict (e.g., drone or missile activity), a party may invoke force majeure if (1) physical incapacity or government restrictions prevent production, and (2) the agreement covers such events (often as “war,” “hostilities,” “terrorism,” “acts of public enemy,” “destruction of facilities,” or “governmental actions”). However, counterparties may challenge: (1) the scope (partial vs. total outage), (2) the duration of the claimed inability, and (3) whether alternate sources or substitute facilities were reasonably available. 

C. Sanctions and compliance driven non performance

Even where physical performance remains possible, sanctions regimes and related compliance measures can create a “legal impossibility” problem.  This is particularly so where performance would require dealings with sanctioned parties, prohibited financial channels, restricted goods, or blocked shipping/insurance coverage. Whether that circumstance qualifies as force majeure often depends on whether a “government order,” “law,” or “regulatory action” is expressly included under the contract and whether the force majeure clause requires performance to be “prevented” as opposed to merely risk enhanced.

D. Impacts on smaller cross-border contracts and investments

While the headlines have focused on force majeure issues related to global supply chains, energy producers, shipping and infrastructure operators affected by the conflict with Iran, individuals and families with cross-border contracts and investments will also be affected by the conflict, sanctions stemming from the conflict, and the application of force majeure provisions. 

5) Common obstacles to invoking force majeure, and how to address them

Force majeure clauses frequently impose procedural requirements—e.g., prompt notice within a specified time, ongoing updates, documentation, and mitigation obligations. See, e.g., PT Kaltim Prima Coal, 180 F.Supp.2d at 482. A failure to comply with such contractual requirements can defeat an otherwise viable force majeure claim. A party considering whether to invoke force majeure should thus calendar notice deadlines immediately (including any “as soon as practicable” standards), provide written notice that tracks the clause language and identifies the specific obligation(s) affected, and preserve evidence of causation (i.e., shipping advisories, port closure notices, carrier cancellations, sanctions notices, facility incident reports, etc.). 

Note that even where “war” or “government order” is covered by the contract’s force majeure clause, invoking the clause generally requires a causal link: that is, the non performance must result from the force majeure event, not from unrelated operational or financial difficulties. See Urban Archaeology Ltd., 68 A.D.3d 562.

Relatedly, many contract clauses require reasonable efforts to avoid or overcome the effects of the event prompting the force majeure notice, including, for example, alternate sourcing, alternate shipping routes, substitute performance, partial performance, etc. See, e.g., PT Kaltim Prima Coal, 180 F.Supp.2d at 482. A party invoking force majeure may be required to show that non performance was unavoidable despite having taken reasonable steps. 

Applied to the current situation, while disruptions tied to the Strait of Hormuz (e.g., inability to charter vessels, insurer refusals, port unavailability, or a lawful inability to transit) may support unavoidability for certain obligations, counterparties might argue that performance could have continued via alternate routes, alternate ports, storage solutions, or commercial workarounds—particularly for longer term supply arrangements. 

6) Related doctrines to consider when force majeure is unavailable or unclear

Even if the controlling contract does not contain a force majeure clause or the clause does not cover “war” or a “government order,” there are other legal doctrines on which a party may rely to pause or avoid their contractual obligations. These include:

Frustration of purpose may excuse performance where an unforeseen change makes the contract’s principal purpose virtually worthless to one party, not merely more difficult or expensive. See PPF Safeguard, LLC v. BCR Safeguard Holding, LLC, 85 A.D.3d 506, 508 (1st Dep’t 2011) (holding that the purpose of an indemnity agreement, which was to induce plaintiff to purchase an interest in defendant, was not frustrated by Hurricane Katrina).

Impossibility of performance typically requires objective impossibility (e.g., destruction of the subject matter or the means of performance). This doctrine is generally applied narrowly. See Kel Kim, 70 N.Y.2d at 902 (holding that plaintiff’s inability to procure and maintain requisite insurance coverage does not fall within the doctrine of impossibility).

Finally, for contracts for the sale of goods governed by the UCC, commercial impracticability (UCC § 2 615) may be available to a seller. The impracticability defense turns on whether performance has become impracticable due to an unforeseen contingency. The standard is demanding and fact specific, and the contingency must truly be unforeseeable. See Bende & Sons, Inc. v. Crown Recreation, Inc., Kiffe Prod. Div., 548 F. Supp. 1018, 1022 (E.D.N.Y. 1982) (holding that a train derailment, even though not specifically contemplated in the contract, was foreseeable, so there was no excuse for non-performance under Section 2-615).

7) How Withers can help

We have lawyers who know the Gulf region well and are skilled in commercial litigation.

We are actively assisting clients with:

• Rapid contract reviews and force majeure notice strategy; 
• Dispute avoidance and negotiation support (i.e., contract amendments, standstills, interim performance agreements); and
• Litigation/arbitration preparedness where counterparties contest causation, notice, mitigation, or the scope/duration of the claimed force majeure.