The ongoing conflict in the Middle East has led to the Iranian Islamic Revolutionary Guard Corps declaring the Strait of Hormuz closed to certain vessels, particularly those linked to the U.S. and its allies. This has created a de facto blockade, via heightened military risks, insurance cancellations, and threats of attacks, halting approximately 70% of commercial traffic through the strait—a critical chokepoint for global oil and liquefied natural gas (LNG) supplies. Major shipping firms have suspended shipping through the strait. Additionally, insurance premiums have surged, with some insurers canceling policies. This has prompted widespread invocations of force majeure clauses.

Invocations of Force Majeure

• QatarEnergy: The state-owned company, responsible for about 20% of global LNG supply, declared force majeure on all LNG shipments after Iranian attacks on its Ras Laffan facilities and the effective closure of the strait, halting production and exports that must transit Hormuz. More details here, here, and here.
• Aluminium Bahrain (Alba) and Qatalum (Qatar): Bahrain's aluminum producer declared force majeure on shipments, halting operations due to inability to transport metal through the strait. Similarly, Qatari smelter Qatalum began shutting down, invoking force majeure amid broader disruptions to industrial inputs like sulfur. More details here.
• Bahrain Petroleum Company: Following an Iranian drone strike that set its refinery ablaze, Bahrain's state oil firm declared force majeure on oil shipments, signaling potential supply disruptions and contributing to fears of rising global oil prices.
• Kuwait Petroleum Corporation: Kuwait declared force majeure on crude oil sales and initiated precautionary production cuts, citing Iranian threats to maritime navigation and a near-total absence of ships willing to cross Hormuz.
• Iraq: The Oil Ministry declared force majeure on all foreign-operated oilfields after Hormuz disruptions halted nearly all crude exports from southern terminals. Production at international concessions has been ordered shut down (with no compensation to operators under existing contracts); this directly stops tanker loadings and affects significant volumes of Iraqi crude.

Force Majeure Basics

A standard force majeure clause will typically list a series of events that the parties have agreed constitute a force majeure event. Most clauses also include a catchall category of events “beyond the reasonable control” of the contracting parties as force majeure events.

The following example is a sample of the force majeure clause supplied in the North American Energy Standards Board’s form gas purchase agreement:

“Force Majeure shall include, but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections or wars; and (v)  governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance.”

Force Majeure Considerations

My colleague Logan Johnson tackled force majeure with respect to the COVID-19 pandemic in some detail. While “insurrections or wars” are more likely to be clearly spelled out in a force majeure clause, there are still some important factors  for companies to consider in this context:

• If you believe a contractual obligation should be excused, or if you have received notice from a contractual counterparty that they are considering not performing under the contract, contact counsel immediately to discuss the issue.
• When evaluating force majeure clauses, it is important to remember that a force majeure provision only excuses nonperformance when the specified event has made performance objectively impossible. If performance of a contract is merely difficult or uneconomical, this will not suffice.
• Review the relevant agreement to identify any potentially applicable provisions, such as force majeure, material adverse change, notice provisions, time limits, and representations and warranties. The specific terms of the agreement—and particularly the force majeure clause—likely control the analysis.
• Conduct a detailed analysis on performance under the contract: When is performance due? Has partial performance occurred? Was partial payment made? This allows you to assess what obligations may be excused and how that affects any future performance.
• Preserve all relevant documents. While self-explanatory, the time-sensitive nature of force majeure litigation calls for a full and complete preservation of relevant documents and information.
• Provide prompt, written notice of all identified issues to your contractual counterparty.   Whether it is providing notice of a force majeure declaration or responding to the same, clear and formal communication is helpful as a matter moves from a contractual arrangement to a more adversarial relationship. Moreover, notice of declaration of force majeure is almost invariably required by the relevant contractual provision. When giving notice (or responding to a notice), provide basic facts, but avoid giving any explanations (particularly regarding causation) that might prevent you from modifying your position as you obtain additional information. Likewise, avoid framing issues with contract performance in terms of pure economic frustration.
• Act quickly and maintain deadlines. Identify specific dates by which your counterparty must respond, and follow up if they fail to do so in a timely manner.