The escalation of armed conflict involving the United States, Israel, Iran, and certain Gulf states following coordinated U.S.-Israeli airstrikes in late February 2026 has significantly and immediately impacted international shipping and logistics. The Strait of Hormuz – a major maritime choke point for the global energy trade – has effectively been shut down, with daily vessel transits collapsing to a fraction of pre-war levels. The consequences for international shipping and logistics are substantial, and the potential legal implications for participants across the global maritime, energy, and supply chain industries are equally far-reaching.
Operational Disruption
Not long after the initial airstrikes began, Iran effectively closed the Strait of Hormuz – through which roughly 20 million barrels of crude oil and more than 20 percent of global liquefied natural gas (“LNG”) transit daily – and warned commercial vessels against transiting through the waterway. As a result, according to Windward and the BBC, transits through the Strait of Hormuz are down 94 percent (or roughly down to only five to six vessel transits per day in contrast to the pre-war average of 120–140 per day) since the start of hostilities, Arabian Gulf port calls dropped by 47 percent within just two weeks of the conflict’s start, and crude exports from ports west of the Strait (e.g., ports in Iraq, Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates) dropped by 87 percent. Iran has attacked and damaged multiple commercial vessels resulting in the death of numerous seafarers. Many other vessels have been diverted or left awaiting clearance as nearby ports quickly fill up.
The disruption extends far beyond just the immediate areas near the Strait of Hormuz. Vessels of all types have been rerouted, including carriers opting to sail around the Cape of Good Hope similar to what was done in response to the Red Sea crisis. This voyage around Africa adds 10 to 14 days and sharply increases overall voyage transportation costs. Many ocean carriers have also pulled back from plans to resume Red Sea services in light of events.
Consequently, fuel costs, freight rates, and insurance premiums have surged. Brent crude surged to $119 per barrel at its peak, with diesel and gasoline prices following suit. According to AAA, as of late March, the national average gas price in the United States has risen to nearly $4 per gallon for regular gasoline.
At the same time, as a result of strikes on energy infrastructure in the Gulf region, parties have elected to halt oil and gas production or suspend or cancel contracts. On March 4, 2026, following attacks on its facilities, QatarEnergy, which is responsible for approximately 20 percent of the global LNG supply, declared force majeure on all of its LNG shipments. Following suit, on March 20, after drone strikes hit refineries in Kuwait, Iraq declared force majeure at all oil fields operated by foreign companies. On March 19, after a direct missile strike on the Ras Laffan complex, Qatar confirmed a halt to gas production at the facility.
The ramifications for downstream industries are still unfolding, and industry participants have started issuing warnings of potential global supply chain consequences, including overall delays and increased costs as a result of route changes, port congestion, cargo backlog, labor shortages, unpredictable shipping schedules, and capacity constraints reminiscent of conditions seen during the COVID-19 pandemic.
Legal Implications
The operational disruption has given rise to an array of significant legal issues that participants in the shipping and logistics sectors must carefully navigate.
Contract Performance and Force Majeure
Similar to QatarEnergy and Iraq as noted above, affected companies may consider invoking force majeure provisions in their affected supply contracts, charterparties, contracts of affreightment or other applicable contracts. Whether or not the current hostilities qualify as a force majeure event under a given contract will depend on the specific contractual language at issue and each contract’s governing law. Even in situations where performance technically remains possible, a substantial increase in costs to perform or the inability to maintain required insurances could be grounds for renegotiation of certain contractual terms or lend itself to claims of commercial impracticability depending on the facts and jurisdiction.
Companies should also be mindful of delivery deadlines and liquidated damages or other fee provisions (detention and demurrage, and the like) that may result from delayed performance. Depending on where a company is located in the supply chain, companies should also consider upstream or downstream knock-on effects that may be compounded at each stage in the supply chain.
War Risk Insurance
War risk insurance is a specialized policy typically covering damage or losses caused by war, terrorism, sabotage, riots, insurrection, or other similar perils, which are usually excluded from standard marine insurance policies. Shortly after the conflict began, many insurers issued notices cancelling coverage for vessels transiting through the Strait of Hormuz or in other adjacent waters or imposed substantial premium increases on such policies.
Companies should be mindful of the related legal implications. Charterparties and vessel financing documents often require that vessels carry certain types of insurances (including war risk coverage) and that the vessels be insured up to certain minimum levels. If war risk coverage is cancelled or becomes too cost prohibitive to maintain, parties may face a potential breach of contract if the coverage is not maintained or be limited in their ability to perform certain voyages without the coverage.
Companies should carefully review their insurance policies for any war risk exclusions or cancellation rights and should monitor any incoming notices from insurers regarding changes to coverage. Companies should also review their insurance requirement provisions in their relevant contracts to ensure continued compliance.
Carrier Surcharges and Contract Negotiations
In response to the crisis and changes in war risk coverages, some carriers have introduced war risk surcharges and other emergency pricing adjustments. Companies should review their contract provisions to understand whether such increases are permitted and whether there are any limitations. In addition, given the drastic market changes in pricing, companies negotiating new contracts may also seek to stall or otherwise delay finalizing such contracts until the market is less volatile and pricing terms are more favorable.
Sanctions Compliance
Over the last few decades, the United States along with the United Kingdom and the European Union have maintained robust sanctions programs against Iran, and this conflict has added new layers of complexity. Companies should monitor any new sanctions that may be levied against Iran in connection with this conflict. In addition, as companies consider making changes to trade routes or supply chains, they should exercise careful due diligence and be aware of other sanctions restrictions that may apply to other parties in the Middle East or Russia, in particular, individuals and entities sanctioned for trading Iranian or Russian oil or “shadow fleet” vessels that have been designated under the Iran and Russia sanctions regimes.
Adding further complexity to situation, the Trump Administration has temporarily eased certain limited sanctions on oil-producing countries, e.g., Russia, Venezuela, and Iran, to stabilize global energy markets. These include:
- Russia – On March 19, 2026, the Office of Foreign Assets Control (“OFAC”) issued a 30-day general license authorizing the delivery and sale of Russian-origin crude oil and petroleum products loaded on tankers as of March 12, excluding transactions involving North Korea, Cuba, and Crimea. (This license supersedes the similar license issued on March 12 and is still scheduled to expire on the original April 11, 2026 date).
- Iran – On March 20, 2026, OFAC issued a 30-day general license authorizing the deliver and sale of Iranian-origin crude and petroleum products loaded on vessels as of March 20.
Various American and European parties have been critical of the sanctions relief arguing that it provides a windfall to Russia and Iran and funds their respective war efforts.
As of now, the United Kingdom and European Union have not issued corresponding sanctions relief, creating a separation between the major Western sanctions regimes, which may result in compliance difficulties for international companies subject to multiple jurisdictions.
Jones Act Waiver
In response to energy market volatility caused by the conflict, on March 17, 2026, the Trump Administration announced a 60-day limited waiver of the Jones Act (46 U.S.C. § 55102) upon request of the Department of War. The waiver permits foreign-flag vessels to transport certain goods, including oil, natural gas, coal, and fertilizer, between U.S. ports for the duration of the waiver period, which voyages would normally be prohibited under the Jones Act. (See our separate article discussing the Jones Act Waiver in more depth here.
Recommended Actions for Industry Participants
In light of the rapidly evolving situation, industry participants should consider a number of proactive measures, including:
- Contract Review – Companies should review their charters and other supply and logistics contracts to understand their exposure and rights with respect to force majeure, insurance, delivery deadlines, and related liquidated damages or other fee provisions, potential defaults, voyage routes, and cost escalation and allocation. Companies should ensure that they send any required notices relating to delays, performance, or insurance.
- Review Insurances – Companies should review their existing insurance policies and confirm their understanding of any war risk coverage requirements, policy exclusions, cancellation rights, and notice obligations. Companies should also confirm any insurance coverage requirements in their charters, loan documents, or other contracts to avoid any inadvertent defaults. For any ambiguities, companies should consult their insurance broker for clarification on coverage.
- Contingency Planning – Companies should plan for various contingencies, including evaluating potential alternative routes and related costs changes, obtaining alternative insurance coverages, or changing suppliers of goods or services.
- Sanctions Compliance – Companies should review their sanctions compliance programs and update them to account for any new counterparties, trade routes, and the evolving regulatory landscape across multiple jurisdictions. Any company considering using any of the recent OFAC general licenses should carefully review and analyze the general license requirements and confirm that any such activity would not be subject to another sanctions regime.
The conflict has introduced a new degree of risk to international shipping and logistics not seen since the early days of the COVID-19 pandemic. Whether the current disruption proves to be short-lived or marks a new beginning, an early and thorough assessment of operational and legal risk is crucial to reduce commercial risk exposure and preserve potential legal rights and remedies for the future.
