The effects of the war in Iran on energy contracts: Between force majeure, hardship and the possibility to claim performance

The war in Iran is giving rise to several collateral (but perhaps foreseeable) effects, involving the (lack of) performance of energy contracts for entities whose operations or fields have been affected by the war.

In particular, after Iranian strikes and military operations disrupting navigation through the Strait of Hormuz: (i) on 3 and 4 March 2026 the major Qatari energy company announced its decisions to stop production of liquefied natural gas (LNG) and associated products and to declare force majeure precluding performance of contracts with its affected buyers; and (ii) on 9 March 2026 also a company from Bahrain declared force majeure on affected operations. Reportedly (iii) on 7 March 2026 a company from Kuwait began cutting oil output and declared force majeure; (iv) on 20 March 2026, Iraq too declared force majeure on all oilfields developed by foreign oil companies; and (v) on 23 March 2026, the world's top oil exporter from Saudi Arabia has cut crude supply to Asian buyers for ‌a second month in April.

While the systemic effects of these decisions can be heavily impacting (as many Countries, in large part, depend on energy coming from States affected by the war in Iraq), the precise legal consequences of these declarations on ongoing energy contracts are unclear, mainly depending on whether the parties foresaw and regulated this kind of scenarios.

Contractual wording providing for the consequences of war over the parties’ relationship

A careful assessment of the contracts regulating the relationship between energy producers and other parties is the essential first step to develop a proper legal strategy.

First, some contracts may foresee the automatic suspension of performance (or termination) in case of war. This kind of clauses may be complex to be interpreted, because it will be necessary to understand what the parties (and, in their silence, the applicable law) meant for “war”, as the reference may apply to a formal state of war, episodic attacks to the territory of the State where a certain entity is based or even the sole risk of attacks based on reliable sources or on a situation of hostility. Quite to the contrary, practice shows that sometimes the parties excluded the risk of war from the causes justifying a termination or suspension of the contract.

A second critical variable is the specific wording of the force majeure clause itself. These clauses are far from uniform: many contain exhaustive lists of qualifying events, and the threshold question will therefore be whether Iranian strikes and/or the disruption of navigation through the Strait of Hormuz fall within the scope of what the parties originally contemplated and contractually defined as a force majeure event.

Once that threshold is crossed — or contested — attention must turn to the consequences and the available remedies. Two sets of questions become central: first, whether the triggering event entitles the affected party to treat the contract as terminated outright, or merely to suspend performance pending resolution of the disruption; and second, whether the party invoking force majeure has complied with any procedural obligations attached to the clause — such as notice requirements or mitigation duties — and whether the steps actually taken meet that standard.

Contractual wording not providing for the consequences of war over the parties’ relationship

In the lack of a clear contractual wording providing for the effect of war over the parties’ relationship, the analysis shall turn on substantive applicable law. A force majeure or hardship declaration is not a blank shield. As shown below, both doctrines come with strict substantive and procedural conditions — including notice obligations — that must be rigorously satisfied. Fall short on any of them, and the non-invoking party retains every right to hold the other side to its contractual commitments.

Public international law

Customary (public) international does not contain any principle providing for the effects of war on contracts and it is difficult to say that force majeure can apply to contracts between private parties as a form of general principle of law grounded in international law. The same reasoning applies to hardship.

A provision on force majeure is not even contained in the 1980 Vienna Convention on the International Sale of Goods (which, generally speaking and unless the parties opted out, is applicable to contracts of sale of goods between parties whose places of business are in different State). War-related events, however, are not necessarily without remedy under the Convention, as Article 79 — in Section IV ("Exemptions") — is widely treated as the Convention's hardship clause. According to this provision “(1) [a] party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it, or its consequences”. The exemption has effect for the period during which the impediment exists and, to be effective, it is subject to a quite strict notice requirement: “(4) [t]he party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt”.

A regulation of force majeure is offered by Article 7.1.7 of the Unidroit Principles on International Commercial Contracts - a soft-law instrument frequently incorporated by reference or used as an interpretive guide in international contracting -, whereby non-performance is excused when the defaulting party proves that: the cause was an impediment beyond its control; that impediment was not reasonably foreseeable at the time of contracting; and that neither the impediment nor its consequences could reasonably have been avoided or overcome. When the impediment is only temporary, the excuse shall have effect for such period as is reasonable having regard to the effect of the impediment on the performance of the contract. However, the party who fails to perform must give notice to the other party of the impediment and its effect on its ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, it is liable for damages resulting from such nonreceipt.

Finally, Article 6.2.2 of the same Unidroit Principles provides for a definition of hardship, whereby “[t]here is hardship where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, and (a) the events occur or become known to the disadvantaged party after the conclusion of the contract; (b) the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract; (c) the events are beyond the control of the disadvantaged party; and (d) the risk of the events was not assumed by the disadvantaged party”. The remedial framework for hardship is then laid down in Article 6.2.3. Upon the occurrence of hardship, the disadvantaged party acquires the right to request renegotiation of the contract, provided it does so without undue delay and sets out the grounds for its request. This right, however, is expressly limited: it does not entitle the requesting party to suspend or withhold performance pending negotiations. Where renegotiations prove unsuccessful within a reasonable timeframe, recourse to a court becomes available to either party. If hardship is confirmed, the court retains a discretion — to be exercised where reasonable — to: (a) terminate the contract, specifying the effective date and applicable terms; or (b) adapt the contract with a view to restoring its original contractual equilibrium.

Domestic legal systems  

How domestic legal systems handle the effects of war on contracts is a question worth examining — though with one important qualification. The doctrine of "trading with the enemy" operates differently across legal traditions: common law systems have historically prohibited such dealings outright, while civil law systems have generally taken no such position. Putting that specific issue to one side, however across all major legal systems, doctrines and mechanisms exist that are capable, in principle, of addressing and mitigating the legal consequences of war on contracts between private entities.

In common law systems, the following doctrines are usually relevant:

• Frustration of contracts, which, according to the House of Lords (see Decision of 19 April 1956, Davis Contractors v. Farhem Urban DC [1956] AC 696, p. 727) "occurs when the law recognises that without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance was called for render it a thing radically different from that which was undertaken in the contract". US law focused, in this respect, on the "commercial impracticability" of the contractual performance (see Supreme Court of California, Decision of 13 March 1916, Mineral Park Land Co. V. Howard et al., 172, Cal. 289, 293: "a thing is impossible in legal contemplation when it is not practicable: and a thing is impracticable when it can only be done at an excessive and unreasonable cost"). It is important to note that, in order to successfully invoke frustration, a party must prove that the change in circumstances is so fundamental and drastic that it renders the performance of the contract no longer claimable. Notably, this is a particularly high threshold to meet, as illustrated by cases involving maritime carriage following the closure of the Suez Canal during the Six-Day War in 1967. In those instances, even though the closure made the performance of certain contracts significantly more burdensome and costly, the courts declined to recognize such circumstances as sufficient to trigger frustration, given that performance remained technically possible, albeit considerably more onerous. See, for example, Commercial Court Queen's Bench Division, Decision of 7 April 1970, Palmco Shipping Inc. v. Continental Ore Corporation (The Captain George K.) 2 Lloyd's Rep. 21. This is why, often, frustration is considered to occur in the circumstances where civil lawyers consider force majeure to be applicable.
• Hardship, occurring when "(something that causes) difficult or unpleasant conditions" is at stake, these cases being somehow overlapping with the concept of “change of circumstances” or “onerousness of performance” used in civil law systems (on which see below.

  As to civil law systems, the following remedies are available:

• Italian law provides for “change of circumstances” or “onerousness of performance”: Article 1467, paragraph 1, of the Italian Civil Code, states that "[i]n contracts with continuous or periodic performance, or with deferred performance, if the performance of one of the parties has become excessively onerous due to the occurrence of extraordinary and unforeseeable events, the party who owes such performance may request the termination of the contract”. It comes therefore that, if a party requests the application of art. 1467, either the other party agrees, or a judicial decision is necessary in order to obtain termination, the burden of proof being on the requesting party.
• Similarly, the German law Geschaftsgrundlage doctrine requires that, if the circumstances that have become the basis of the contract have changed significantly after the conclusion of the contract, and the parties would not have concluded the contract or would have concluded it with different content if they had foreseen these changes, the adaptation of the contractual terms can be required if, taking into account all the circumstances of the specific case, and in particular the contractual distribution of risks, one of the parties cannot be expected to maintain the unchanged contract.
• French law imprevision doctrine (set forth at art. 1195 of the Code Civil) provides: "[i]f an unforeseen change in circumstances compared with the time the contract was entered into renders performance excessively onerous for a party who did not agree to assume the risk, that party may request renegotiation of the contract from its counterparty. It shall continue to perform its obligations during the renegotiation. If the renegotiation is refused or fails, the parties may agree to terminate the contract, on the date and under the conditions they determine, or jointly request the court to adapt it. If no agreement is reached within a reasonable time, the court may, at the request of a party, revise the contract or terminate it, on the date and under the conditions it sets".
• Finally, the French Civil Code (at Article 1218) also provides for force majeure: "Force majeure in contractual matters exists when an event beyond the debtor's control, which could not reasonably have been foreseen at the time the contract was entered into and whose effects cannot be avoided by appropriate measures, prevents the debtor from performing their obligation. If the impediment is temporary, performance of the obligation is suspended unless the resulting delay justifies termination of the contract. If the impediment is permanent, the contract is automatically terminated and the parties are released from their obligations (…)".

All in all, while war can undeniably cast a long shadow over contractual obligations, the path to invoking its legal consequences is anything but simple or predictable. Across all legal systems examined, the disruption caused by war must be truly unforeseeable, its impact on the parties' relationship unavoidable, and its invocation subject to strict and unforgiving notice requirements. Precisely because the legal landscape surrounding war and contracts is so complex and uncertain, the greatest lesson to be drawn is the importance of anticipation and preparation. Rather than waiting for chaos to strike and scrambling to find a legal lifeline, savvy contracting parties would be well-advised to identify and negotiate their options well in advance — crafting tailored contractual provisions that leave as little as possible to the unpredictability of the law.

Authored by Andrea Atteritano and Prof. Giovanni Zarra.