Force Majeure and the 2026 Gulf Oil Crisis

Force majeure · Frustration · Hardship · MUR Shipping · UAE Civil Code 2025 · Saudi Civil Transactions Law · DIFC · BIMCO war risks · Sanctions

Every oil, gas, shipping, construction and insurance contract touching the Gulf is now being looked at through the same lens: who bears the risk of the crisis that began on 28 February 2026? The answer depends in almost every case on three things: the words of the contract, the law which governs it, and the particular obligation said to be affected. This paper brings together, in one place, how each of the laws used in the region deals with events of this kind, how the standard forms allocate the risk, and how the answer changes with the governing law.

What the paper covers

• English law (and the ADGM)
• UAE law: the onshore Civil Code (old and new), the Maritime Law and the DIFC
• Saudi Arabian law: the Civil Transactions Law 2023 and the Sharia background
• The other GCC states: Qatar and the QFC, Kuwait, Bahrain and Oman
• Singapore law
• Australian law
• The comparison: the same facts under six laws
• The standard forms: charterparties, crude oil general terms, LNG sale and purchase agreements, EPC forms, the ICC clauses and GAFTA
• War-risk insurance, P&I and sanctions
• Practical guidance

Summary of conclusions

9.In my view the position can be summarised as follows.

(a)Under English, Singapore and Australian law there is no overarching doctrine of force majeure: the only matter of relevance is what, if anything, the parties have agreed in their contract in that regard. Each of those three common law systems applies the same method:

(i)Construe the words of the agreement carefully;

(ii)Where the parties have agreed some form of force majeure provision, require the party relying on the clause to prove:

(1)The event;

(2)The causal link between the event and the harm suffered;

(3)In most clauses, that reasonable steps could not have avoided the effect; and

(iii)Refuse relief where the true complaint is that performance has become more expensive.¹

(b)The closure of Hormuz is different in kind from the closest historical parallel: the closure of Suez:

(i)Cases relating to the Suez crisis generally turned on there being another route – but one which was longer and more expensive;

(ii)A cargo loaded inside the Gulf has no sea route at all while the Strait is shut.

(iii)Whether or not that prevents an obligation from being fulfilled depends on the precise nature of the obligation: an FOB seller inside the Gulf can still load a ship that is there; what is prevented is the arrival or departure of the buyer’s vessel, and on FOB terms that is the buyer’s obligation. A CIF or DES seller, who must procure the carriage, is prevented in its own performance.

(c)The Supreme Court’s decision in MUR Shipping in 2024 settles, for English law, that a reasonable-endeavours proviso does not require the affected party either to accept an offer of non-contractual performance or itself to secure performance in a non-contractual way. Thus, where English law applies, a seller who contracted to load at Ras Tanura is not required, in order to invoke the clause, to tender Yanbu; and its buyer, on ordinary principles, need not take it, unless the load-port clause already includes Yanbu.² Where the contract gives the seller a range of load ports, the position reverses: damming one channel diverts the duty to others.

(d)Notice provisions are being enforced as conditions precedent without any gloss of prejudice.³

(e)In contrast to the common law systems set out above, the UAE and Saudi Arabia are both civil-law systems with a three-part statutory scheme:

(i)Impossibility (which ends the contract);

(ii)Exoneration from liability for an external cause (a default rule the parties can displace); and

(iii)Hardship or “exceptional circumstances” (a mandatory rule the parties cannot displace, under which a court may reduce an obligation that has become oppressive).⁴

(f)The other four GCC states follow an older Egyptian model:

(i)Qatar (Article 171(2) of the Civil Code),

(ii)Kuwait (Article 198),

(iii)Bahrain (Article 130) and

(iv)Oman (Article 159 of the Civil Transactions Law)

each have a mandatory hardship rule under which the court may reduce an oppressive obligation to a reasonable level, and in each any agreement to the contrary is void. Kuwait and Bahrain say expressly that the court may do so by increasing the other party’s counter-performance, which in a supply contract means the price, and the Saudi Explanation now reads Article 97 the same way; whether the shorter Qatari and Omani wording allows the same is not settled. It is not apparent that there is a construction-specific rebalancing power of the sort found in the new UAE or Saudi law in any of the four, and the Qatari Civil Code provides that rises in the cost of materials and wages do not affect a contractor’s obligations, subject only to the hardship rule.

(g)The Qatar Financial Centre, like the DIFC, has a UNIDROIT-style force majeure excuse and, as reported, no hardship rule.⁵

(h)The consequence is that the same facts can – and do – produce very different answers across the region. A Gulf supplier whose costs have doubled will probably get little or no relief under English law but may well get a judicial price adjustment under UAE or Saudi law. A party that has agreed to bear the risk of war gets no relief in London, Singapore or Sydney, is probably held to its bargain in Riyadh (Article 174 of the Saudi Code allows the debtor to take the risk of force majeure, though the recent Saudi Explanation reads such a clause narrowly), and may find its agreement void in Dubai insofar as it excludes the hardship article. A DIFC contract sits in between: a statutory force majeure excuse exists without a clause, there is no hardship rule, and the Court of Appeal has said that a plea of frustration faces “the apparent lack of any principle of frustration” in the Contract Law.⁶

(i)The published Gulf crude terms (ADNOC, QatarEnergy, BP) are drafted presciently and are friendly to the seller: allocation, deduction of the shortfall and deemed termination of the shipment are available, not damages. Saudi Aramco’s terms are not published, and no source records an Aramco force majeure notice.

(j)In shipping the war-risks clauses tend to govern the dispute, not force majeure:

(i)A blockade is an express war risk; and

(ii)An owner who makes a good-faith and objectively reasonable judgment that the vessel may be exposed can refuse to enter that blockade or continue its course, and on the 2013 and 2025 BIMCO wordings can do so whether or not the risk existed when the charter was fixed.

(k)Sanctions now affect every contract in the chain. A Hormuz transit “toll” is prohibited for US persons, exposes non-US persons to secondary sanctions, discharges hull war insurers under the LMA’s Transit Fee Condition and is arguably an order for a “Sanctioned Activity” which an owner may refuse under the BIMCO clause. Since 29 September 2026 the United Kingdom has again banned Iranian-origin oil and prohibited insurance for persons connected with Iran, and in October OFAC warned foreign banks that deal with sanctioned Iranian banks that they could be designated without notice.

The sources

Each footnote in the paper ends with a reference to the folder of sources compiled for it. The sources page lists all 261 footnotes with a link to each source. The judgments, legislation and official documents (104 files) can be opened one by one from that page or downloaded in bulk. Press reports, law-firm and market publications, standard forms and books are not reproduced; the sources page links to them where they are published online.

1. 1Thames Valley Power Ltd v Total Gas & Power Ltd [2005] EWHC 2208 (Comm) at ¶50; RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] SGCA 39 at [70]; Hyundai Merchant Marine Co Ltd v Dartbrook Coal (Sales) Pty Ltd [2006] FCA 1324 at [60]–[62] (footnote 6 of the paper). Source. ↩
2. 2RTI Ltd v MUR Shipping BV [2024] UKSC 18 at ¶¶38–39, 44, 59, 102 (footnote 7 of the paper). Source. ↩
3. 3ADM Industries Centers Ltd v Inerco Trade SA [2026] EWHC 1873 (Comm) at ¶¶51–52 (footnote 8 of the paper). Source. ↩
4. 4Civil Transactions Law, Royal Decree M/191 of 29/11/1444H (18 June 2023), arts 97, 110, 125, 174; Ministry of Justice Research Centre, شرح نظام المعاملات المدنية (Explanation of the Civil Transactions Law, 1st ed, 28 September 2026), Vol 1 pp 288–294 (art 97) and 334–336 (art 110) (footnote 9 of the paper). Source. ↩
5. 5Qatar Civil Code, Law No. 22 of 2004, art 171(2) (Arabic text, Supreme Judiciary Council encyclopedia; English per the ICNL-hosted translation), art 700 (as quoted by Clyde & Co, 23 May 2022); Kuwait Civil Code, Decree-Law No. 67 of 1980, art 198 (Arabic); Bahrain Civil Code, Decree-Law No. 19 of 2001, art 130 (Arabic and English, Bahrain EDB portal); Oman Civil Transactions Law, Royal Decree 29/2013, art 159 (Arabic); QFC Contract Regulations 2005, arts 85 and 94, as described in “Contract Law of Qatar” (Cambridge University Press), ch 13 (Regulations not opened) (footnote 10 of the paper). Source. ↩
6. 6DIFC Contract Law, DIFC Law No. 6 of 2004, art 82; Collection Club Restaurant Ltd v MAG Development Services Ltd [2026] DIFC CA 006 at ¶¶18, 43–49 (footnote 11 of the paper). Source. ↩