The escalating conflict involving Iran has become one of the most significant geopolitical events of the decade. Its impact is being felt far beyond the Middle East, sending shockwaves through global supply chains, energy markets, and commercial contracts. For businesses already grappling with inflationary pressures and post-pandemic restructuring, the renewed instability has created a fresh layer of legal and operational risk.

In 2026, organisations must reassess their exposure to supply chain disruption, sanctions compliance, and contractual obligations. The legal landscape is shifting quickly — and businesses that fail to adapt may find themselves facing increased costs, regulatory scrutiny, and disputes with suppliers or customers.

This article explores the key legal issues arising from the Iran conflict and outlines practical steps businesses can take to protect themselves.

1. The Strategic Importance of the Strait of Hormuz

The Strait of Hormuz remains one of the world’s most critical maritime chokepoints. Approximately 20% of global oil and liquefied natural gas passes through this narrow corridor. Any disruption — whether from military activity, blockades, or heightened security measures — has immediate consequences for global trade.

Legal implications for businesses

· Shipping contracts may face delays, diversions, or increased freight rates.

· Marine insurance premiums have risen sharply, with some insurers imposing war-risk surcharges.

· Delivery obligations under supply contracts may become harder to meet, raising questions about liability for late performance.

Businesses reliant on Middle Eastern energy or raw materials should review their contractual risk allocation and ensure they understand who bears the cost of disruption.

2. Fuel Price Volatility and Rising Operational Costs

The Iran conflict has contributed to significant volatility in global oil and gas markets. Even short-term instability can lead to:

· Higher fuel costs for logistics and transportation

· Increased manufacturing and production expenses

· Surcharges imposed by carriers and freight forwarders

Contractual consequences

Many commercial contracts do not adequately address sudden price spikes. Businesses should review:

· Price adjustment clauses

· Indexation mechanisms

· Pass-through provisions

· Renegotiation triggers

Where contracts are silent, parties may face disputes over who absorbs the additional costs.

3. Force Majeure and Frustration: Can Businesses Rely on Them?

As supply chain disruption intensifies, many organisations are asking whether the Iran conflict constitutes a force majeure event or whether contracts could be deemed frustrated.

Force majeure

Whether the conflict qualifies depends on:

· The wording of the clause

· The nature of the disruption

· Whether performance is impossible or merely more expensive

Courts generally interpret force majeure clauses narrowly. Increased costs alone rarely suffice.

Frustration

Frustration applies only where performance becomes impossible or the contract’s purpose is destroyed. It remains a high bar and is unlikely to apply to most commercial arrangements affected by geopolitical events.

Businesses should not assume these doctrines will offer an easy escape route.

4. Supply Chain Resilience: Legal Steps Businesses Should Take Now

With geopolitical instability likely to continue, organisations should take proactive steps to strengthen their legal and operational resilience.

a. Map your supply chain

Identify:

· Critical suppliers

· Single-source dependencies

· Exposure to Middle Eastern shipping routes

b. Review and update contracts

Ensure contracts include:

· Clear risk allocation

· Robust force majeure provisions

· Price adjustment mechanisms

· Sanctions compliance warranties

· Audit and verification rights

c. Strengthen due diligence

Enhanced supplier vetting is essential, particularly where goods or services may originate from high-risk jurisdictions.

d. Reassess insurance coverage

Businesses should review:

· War-risk exclusions

· Business interruption policies

· Trade credit insurance

e. Diversify where possible

Alternative suppliers, routes, or energy sources can reduce exposure to geopolitical shocks.

Berry Smith Bottom Line

The Iran conflict has underscored how interconnected and vulnerable global supply chains remain. Rising fuel prices, sanctions complexity, and shipping disruption are creating new legal challenges for businesses across all sectors.

Organisations that take early, informed action — by reviewing contracts, strengthening compliance frameworks, and reassessing supply chain risk — will be better positioned to navigate the uncertainty ahead.

Legal preparedness is no longer simply a compliance exercise. In 2026, it is a strategic neces

If you have any questions or need any assistance relating to your businesses contracts or any supply chain concerns, please do not hesitate to contact us at commercial@berrysmith.com or on 029 2034 5511.