Beyond Force Majeure: The coming wave of cross-border disputes from the Middle East crisis

The crisis moves from ports to courtrooms

The current conflict involving the United States, Israel and Iran has disrupted one of the world's most critical energy and maritime corridors: the Strait of Hormuz. Before the conflict, around 20.9 million barrels per day of oil and petroleum products and 11.7 billion cubic feet per day of LNG moved through the strait in 1Q25, according to the US Energy Information Administration (EIA).

By 2Q26, those flows had fallen to 4.9 million barrels per day and 0.8 billion cubic feet per day, respectively. The disruption has led to force majeure notices, higher freight and war-risk costs, and uncertainty regarding supply continuity and commercial obligations. Clients, therefore, need to review force majeure rights, war-risk clauses, notice provisions and mechanisms for allocating disruption-related costs.

What began as an energy shock has spread into aviation, shipping, fertilisers, petrochemicals and other supply chains. Disruption to Gulf feedstocks and fertiliser supplies can persist beyond the initial event as businesses draw down inventory, reroute cargoes and search for substitute suppliers. The result is a wider set of contractual, insurance and damages issues.

Force majeure clauses are not a free pass

A force majeure clause is not a blanket defence. The starting point is the contract itself: the clause wording, governing law, notice requirements and events covered. The following questions are whether the crisis falls within the clause, whether it actually prevented the affected party from performing the specific obligation, and whether that non-performance caused the loss. The answer can vary materially between contracts and jurisdictions.

For example, if a route or port is unavailable, the analysis may turn on whether the cargo could reasonably have moved via an alternative route or vessel, or whether another supplier or port was available. Merely the increased cost or delay will not necessarily establish force majeure where performance was not entirely impossible.

Recent events show how quickly these issues can raise difficult contractual questions. QatarEnergy has extended force majeure notices affecting LNG deliveries to customers, including Italy's Edison and Asian buyers. Petronet LNG issued a force majeure notice amid vessel constraints, with GAIL considering curbs on supplies to customers.

Once force majeure is established, loss quantification begins

Once force majeure has been legally upheld, the economist's or valuation expert's task is to measure the economic consequences of the relevant contractual non-performance. The starting point is counterfactual analysis: the claimant's position if the legally relevant non-performance had not occurred. Crucially, this is not necessarily a world without the Middle East war – since the mere emergence of war conditions may not have precipitated the specific force majeure declaration. Other war-dependent conditions, including regional freight disruption, higher energy prices, weaker demand, or market-wide shortages, may remain in the counterfactual.

Consider a buyer receiving only part of a contracted Gulf fertiliser shipment. The proper comparison may assume timely contractual delivery while accounting for the broader rise in gas, urea, and freight costs affecting all suppliers. The analysis then asks what incremental loss followed from the shortfall: cover purchases, production interruptions, lost sales, inventory depletion, and downstream effects.

The assessment should be ex ante, using information reasonably available at the relevant date rather than selecting an outcome with hindsight. Damages should also reflect mitigation, including rerouting, substitute inputs, inventory drawdown, or cover purchases. Avoided production, transport, and selling costs should be deducted, while pass-through to customers and associated volume effects should be treated consistently.

Evidence required to support loss and damage claims

For commercial arbitration and dispute advisory services, the evidence becomes crucial even before a dispute reaches a tribunal. Preserve contracts, charterparties, bills of lading, purchase orders, inventory records, vessel-tracking data, production logs, invoices, emails and records of mitigation. A clear chronology should establish when the disruption occurred, which obligation was affected, which alternatives were available or considered, and what mitigation was implemented.

Financial and commercial experts add considerable value when they turn operational records and market data into evidence of what changed, what constitutes the counterfactual, and the delta attributable to the relevant non-performance. These are distinct questions. Vessel tracking data, production logs, inventory records, purchase orders, and customer invoices establish the factual sequence; the counterfactual requires comparison. In an arbitration, the parties may advance competing explanations for the same financial outcome. The expert's analysis, therefore, needs to test whether the claimed loss is better explained by the relevant non-performance or by other factors affecting the business simultaneously.

Time series analysis can show how output, margins, or delivery times evolved around the disruption. Panel data can be extended by comparing affected products, routes, plants, or geographies with less-exposed counterparts over the same period. A simple before-and-after comparison is often informative but rarely conclusive: freight rates, energy costs, sanctions, seasonal demand, and macroeconomic conditions may all move simultaneously. Where the data support it, a difference-in-differences approach compares the change for the exposed group with the contemporaneous change for a credible comparator. Regression analysis can then control for observable concurrent shocks. Event study logic may assist with discrete announcements or route closures, but overlapping news must be separated before abnormal movements are attributed to the event.

The method should follow the commercial mechanism. Capacity and inventory analysis can show whether a delayed input actually constrained production, when buffers ran out, and whether lost sales were recoverable later. Freight, insurance, and commodity benchmarks can test replacement costs; pass-through analysis can determine whether higher input costs reduced margins, raised prices, reduced volumes, or combined these effects. Robustness checks across comparators, windows, controls, lags, and assumptions discipline attribution.

War-risk insurance claims and mitigation analysis require a coherent approach

Damages may depend on operational, economic, political, geographical and legal risks. The expert should avoid simply adding a generic risk premium to a damage calculation. Instead, risk should be tied to the valuation method, cash flows, probabilities and the contractual or legal framework being applied. Any adjustment should be transparent and economically coherent, with no double-counting of risks already reflected elsewhere in the analysis. The sharp movement in war-risk insurance pricing during the conflict also shows why risk assumptions should be grounded in observable market conditions.

Observable market indicators can provide an independent measure of economic value and the crisis's incremental effect, but only if the comparison is carefully designed. The useful question is not simply how far a price moved after the war. It is whether a Middle East-exposed outcome moved differently from a less-exposed benchmark over the same period.

That difference-in-differences intuition can be applied even without a formal econometric model. Changes in Gulf-linked tanker or container rates can be compared with those on less-exposed routes; additional war-risk premiums can be assessed for cover in lower-risk waters; and prices for urea, ammonia, sulphur, polypropylene, or helium can be compared, with inputs less dependent on Hormuz. The same lens can be used for aircraft or port assets, sector equities, credit spreads, and country risk measures by comparing exposed firms or economies with otherwise similar peers. Such evidence helps triangulate contract prices, replacement costs, and asset values by reflecting market decisions in real time.

The comparator is central to identifying the incremental effect. It should face similar demand, cost, and macroeconomic forces, exhibit reasonably similar pre-event trends, and not be materially affected by the crisis itself. That condition is demanding. Oil prices, shipping congestion, and global risk sentiment can contaminate nominally unaffected markets. Raw postwar movements may also reflect monetary policy, seasonality, other conflicts, or firm-specific news. Once isolated, the incremental effect can inform cash flows and valuation.

Other key commercial disputes and business interruption claims

• Valuation and exit disputes: Geopolitical disruption can lead to a widened gap between seller expectations and buyer valuations, especially where transaction value depends on throughput, access, operating capacity or future cash flows. The appropriate valuation date, the assumptions used to forecast future performance, or the extent to which changes in market conditions are attributable to the relevant event can be factors that lead to disputes. For a financial expert, the analysis may involve testing these assumptions against market evidence, comparable transactions and observed operating performance.
• Insurer vs insured disputes: Insurance disputes may turn on whether a loss is covered, the application of war or political-violence exclusions, notice, aggregation and the quantum of the claim. Where coverage is established or disputed, financial experts may be required to assess the extent of the loss, distinguish insured losses from other business impacts, and test the quantum against underlying operational and market evidence.
• Damages and loss-quantification disputes: The same attribution issues arise in business interruption and contractual claims. For example, the disruption to QatarEnergy supplies has left Italy's Edison with 35 LNG cargoes subject to force majeure, of which 23 had already been replaced, mainly by US suppliers. The financial question is which portion of the loss is attributable to the insured event or to contractual non-performance, after accounting for mitigation, avoided costs, and alternative sources of supply.

As the Middle East crisis continues to affect trade routes, prices and risk allocation, disputes will increasingly turn on evidence and disciplined economic analysis. Legal entitlement and damages remain intertwined but distinct. Once the contractual or insurance right is established, the economic expert can help quantify the incremental loss using a transparent counterfactual and consistent treatment of mitigation and risk.

Gaurav Ghosh, Associate Partner, Transfer Pricing; Srimant Jain, Director, Crisis and Resilience, Grant Thornton Bharat have also contributed to this article.

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