The clause was in every contract. It was reviewed at signing and filed as boilerplate. On March 4, 2026, it became the most consequential document in global energy trade.
This piece was written in the second week of March 2026, as the legal machinery of global energy contracts began engaging in ways that most counterparties had never anticipated. It is not a legal analysis. It is a risk governance analysis of the contractual cascade that follows when the physical infrastructure of global energy trade fails simultaneously — and what that cascade reveals about the quality of organizational risk frameworks that were in place before February 28.
The force majeure clauses being invoked across the energy sector right now were not written for this scenario. They were written for the scenario that risk professionals, at signing, believed to be a reasonable upper bound on disruption. That belief is now on the record. What it reveals about institutional risk thinking is the subject of this piece.
Second in a three-part series examining how the 2026 Hormuz crisis is reshaping risk governance. Part I addressed the structural failure of risk frameworks in calm conditions. Part III will address the reconstruction.
Force majeure is among the most familiar phrases in commercial contract law and among the least interrogated. It appears in energy supply agreements, charterparties, LNG offtake contracts, and commodity purchase arrangements with such regularity that the legal teams reviewing it have, in most organizations, developed a shorthand review process: confirm the clause is present, confirm the standard events are enumerated, move to the next item. The clause is treated as risk management by inclusion — the institutional equivalent of noting that the building has sprinklers without asking whether they have been tested.
Force majeure does not apply by operation of law. It applies only if the contract says it applies — and only to the events the contract specifically contemplates.
The first thing a risk professional needs to understand about what is happening right now is that force majeure, unlike the doctrine of frustration in common law, is not a general legal relief mechanism. It does not apply by operation of law when circumstances become sufficiently difficult. It applies only if the contract says it applies — and only to the events the contract specifically contemplates. The clause is interpreted strictly. Courts have consistently held that force majeure clauses will not be construed beyond their express terms, regardless of how unanticipated the triggering event may have been.
This matters in March 2026 because the invoking parties — Qatar LNG, Kuwait Petroleum, multiple charterparty owners across the Persian Gulf — are making force majeure declarations based on contractual language that was, in most cases, drafted before the current set of risk scenarios had been conceived as plausible planning inputs. The question is not whether something extraordinary has happened. It plainly has. The question is whether the extraordinary thing that happened is the same extraordinary thing the contract said would excuse performance. In many cases, it is not obvious that it is.
Consider the typical energy supply contract's force majeure clause. It enumerates: acts of war, natural disasters, government action, strikes, and — in post-COVID drafts — pandemic. It typically does not enumerate: the effective functional closure of a major maritime chokepoint resulting from threats rather than a formal legal closure, under conditions where transit is technically possible but commercially non-viable due to war-risk insurance suspension. The Strait of Hormuz, as of March 9, has not been legally closed. It has been made effectively inaccessible. That distinction is not semantic. It is the precise distinction on which millions of dollars of force majeure litigation will turn.
What the legal teams at Hill Dickinson, Watson Farley, and Clyde & Co were publishing in the first week of March 2026 is instructive. The consistent theme across maritime law commentary was that while force majeure declarations could be supported where the specific contractual language was broad enough, the clause would be interpreted on its own terms, strictly. The phrase that appears in nearly every analysis is the same: "it would be a question of fact what risks were known and foreseeable at the time the charterparty was entered into." The foreseeability question is where the risk governance failure becomes a legal exposure.
The contractual cascade began faster than any legal team was prepared to manage. The timeline of force majeure declarations in the first eight days after Operation Epic Fury is worth reviewing precisely, because the sequence matters for understanding not just what happened but what the organizations with the best risk governance did differently from those without it.
What is notable about this timeline from a risk governance perspective is not the extraordinary nature of the events. It is the speed. The contractual cascade from first disruption to systemic force majeure declarations across multiple sovereigns took eight days. The organizations that had pre-positioned legal analysis, pre-mapped their contractual exposure across their supply chain, and had existing playbooks for supply disruption notification procedures were operating in a different world from those that were conducting that analysis for the first time after the cascade had begun.
Risk professionals who are not lawyers — and most are not — need to understand two legal doctrines that are now actively in play across their portfolio companies' contractual relationships. Force majeure and frustration are distinct mechanisms that apply in different circumstances and have different consequences. Understanding the difference is not an academic exercise. It is a governance requirement.
The foreseeability question is where risk governance failure becomes legal exposure. If the event was foreseeable and the contract didn't address it, courts may find the risk was allocated — by omission — to the party invoking force majeure.
The practical implication for organizations managing portfolio company relationships or their own supply chains is this: the strength of a force majeure position depends heavily on when the contract was signed and what the parties knew about Hormuz risk at that time. A contract signed in January 2024, before the current escalation cycle became apparent, is in a materially different position from a contract signed in November 2025, after Iranian threats to shipping had already been explicitly discussed in public forums. The risk governance function's obligation now is to map that exposure across the contract portfolio — not abstractly, but specifically, contract by contract, counterparty by counterparty.
The BIMCO War Risks Clause 2025, incorporated into a significant number of charterparties executed in the 12 months before the crisis, provides owners with the clearest contractual basis for refusing transit orders that would expose the vessel to war risks. Where this clause is incorporated, the legal position is substantially cleaner. Where it was not incorporated — because the parties did not anticipate needing it, or because standard-form contracts were used without updating — the position requires significantly more careful analysis.
For private equity and private credit professionals, the force majeure cascade is not an abstract legal problem. It is arriving in the form of specific conversations with portfolio company management teams who are facing decisions that were not in any operating plan filed twelve months ago. The risk governance function's value in this moment is not providing legal opinions — that is counsel's role — but providing the analytical framework within which those decisions can be made coherently and documented in a way that protects the institution.
The exposure categories are distinct and require separate treatment. Understanding which category a given portfolio company falls into is the first obligation. The categories are not mutually exclusive, and the most exposed positions are those facing multiple simultaneous pressures across categories.
What makes portfolio-level risk assessment genuinely difficult in the current environment is not the complexity of any individual exposure. It is the correlation. Under normal conditions, the risk framework for each portfolio company can be evaluated independently, with inter-company dependencies treated as relatively minor second-order effects. The current disruption breaks that assumption entirely. The energy price shock, the supply disruption, and the credit market pressure are hitting simultaneously, across the same portfolio, driven by the same root cause. The portfolio-level risk is not the sum of the individual risks. It is substantially larger.
The maritime insurance market deserves particular attention as an indicator of how the professional risk community has priced the Hormuz disruption. Insurance markets are imperfect signal processors, but they are the closest thing to a real-time institutional risk assessment that exists for physical commodity exposure. What has happened to war-risk premiums and VLCC rates since February 28 is not simply a market reaction to an extraordinary event. It is a structural repricing of a risk that was previously being systematically underpriced.
The VLCC rate at $200,000 per day for Cape of Good Hope routing is more than a cost increase. It is the market's statement about the value of Hormuz as infrastructure. When the strait is functioning normally, the rate for that transit reflects a world in which the chokepoint is assumed to be passable. When it is not passable, the market price for the next-best alternative reveals what that assumption was worth. In this case, the answer is approximately $140,000 per day in additional cost, on top of 10–14 additional transit days of fuel and operating expense.
For organizations with supply chains or commodity delivery obligations denominated in per-voyage costs, the arithmetic is straightforward. For organizations whose supply contracts were priced on the assumption of normal Hormuz transit, the question of who bears this cost increase is, again, a function of contract language that was written without this scenario as a planning input.
The shadow fleet is passing through. Compliant tankers are anchoring. The practical effect is a two-tier global energy market, bifurcated by willingness to accept legal and physical risk — for the first time since the tanker wars of the 1980s.
There is one further dimension of the shipping disruption that deserves attention: the role of the shadow fleet. As Lloyd's List reporting in the second week of March 2026 makes clear, the vessels transiting Hormuz are predominantly shadow fleet tankers — operating outside the Western insurance and compliance architecture, willing to accept risk that compliant operators are not. The practical effect is a two-tier global energy market, bifurcated by willingness to accept legal and physical risk. Iran is moving its own oil through the strait. Sanctioned vessels are transiting. The compliant tanker fleet is anchoring outside. This bifurcation has direct implications for organizations assessing whether their supply chains are, in any real sense, diversified — or merely diversified within the compliant tier, with identical exposure to the same chokepoint disruption.
The risk governance function's immediate obligations in the current environment are specific and time-sensitive. They fall into three categories: contractual review, portfolio assessment, and framework stress-testing. None of these is new to the function. What is new is the urgency and the standard of care required.
| Standard Risk Review Cycle | Current Requirement | |
|---|---|---|
| Contractual audit | Annual review of key contracts | Immediate audit of all material contracts for force majeure language and foreseeability position |
| Portfolio assessment | Quarterly risk committee review | Real-time triage by compounding exposure category, continuous update |
| Stress testing | Annual scenario analysis, price-based | Duration-based scenario analysis at 30/60/90 day intervals, ongoing |
| Reporting cadence | Quarterly to investment committee | Weekly minimum to senior leadership, with real-time escalation protocols |
The organizations whose risk governance functions are performing well in the current environment are not doing something fundamentally different from what good risk governance always requires. They are doing the same things faster, with better pre-existing tooling, and with the institutional standing to influence decisions rather than document them after the fact. The difference between a risk governance function that is genuinely useful in this crisis and one that is not is not intelligence or capability. It is preparation and positioning — both built in the years before the crisis began.
Every force majeure declaration being filed this week was enabled by contractual language that existed before February 28. The question is not whether the clause was present — in most material contracts, it was. The question is whether the organizations holding those contracts knew what the clause actually said, what scenarios it covered, and what their obligations were when a counterparty invoked it. That knowledge gap is not a legal problem. It is a risk governance problem.
The force majeure cascade will produce litigation. Some of it will involve organizations arguing that a scenario was unforeseeable that sophisticated risk analysts were discussing as a realistic planning input twelve months ago. Those arguments will be made in some cases because they are legally sound. In other cases, they will be made because no one thought to build the analysis before it was needed. Risk governance exists precisely to eliminate the second category of case. The current crisis will, over the next several years, provide a clear record of which organizations had done that work and which had not.
The boilerplate was always consequential.
The crisis simply made that visible.
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