The situation in the Middle East has created a landscape of uncertainty for businesses with interests in the Gulf States and beyond. Supply chains are under pressure, energy markets are volatile, and the continued uncertainty presents challenges to businesses with operations in the region.

For commercial parties, a number of significant legal and practical issues arise that demand careful consideration. In the region, many commercial contracts in a broad range of sectors and industries are chosen by the parties to be governed by English law. This blog examines the principal areas of law and regulation and offers practical guidance on how businesses can protect their positions from an English law perspective.


Frustration of Contract

Under English law, contractual performance will be excused due to unexpected circumstances only if they fall within the relatively narrow doctrine of frustration. The threshold for frustration is high. English courts have consistently held that mere hardship, increased expense, or the fact that performance has become more onerous will not suffice.

In summary:

Frustration can only apply to events that occur after the contract has been agreed.
In general, it only applies where events occur that make the performance of the contract: (1) impossible; (2) illegal; or (3) something radically different from that originally envisioned by the parties.
It is not enough that a contract becomes more expensive or onerous than originally contemplated due to events falling short of this.
The doctrine does not apply where the matters relied on were the fault of one of the parties or the risk has been expressly or impliedly allocated under the terms of the relevant contract. For example, it will not apply to a risk that has eventuated where the parties have agreed an express force majeure clause which includes that risk.
Where frustration applies, the contract is automatically discharged. That is any future performance that would otherwise have happened under the contract is released or cancelled.
Obligations that have already become due will survive as will certain clauses such as choice of court and arbitration clauses.
The automatic discharge happens without the need for either party to take any further steps such as sending a notice confirming that frustration has occurred.

Given the doctrine’s restrictive application, parties should not regard frustration as a reliable or predictable regime for the allocation or mitigation of legal risks.




Force Majeure

Unlike the doctrine of frustration, there is no implied or free-standing doctrine of force majeure; the concept exists only to the extent that it is expressly provided for in a contract. As a result, the scope and effect of any force majeure protection depends entirely on the drafting of the relevant clause.

Businesses, particularly those impacted by the conflict in the GCC region, should urgently review their contracts to determine whether force majeure provisions are engaged. The following questions will assist with interpreting the scope of the relevant clause:

Is this situation within the force majeure events covered by the clause? Does it expressly cover “war”, “armed conflict”, “hostilities”, or “government action” as qualifying events?
If not, is it within more general wording? Many force majeure clauses also include catch-all language referring to events “beyond the reasonable control” of a party, which may be broad enough to capture the consequences of the current unrest even if armed conflict is not specifically enumerated
Does the event have to be tied to a specific obligation or does it affect the contract generally?
Does the clause cover events that hinder performance or only events that entirely prevent performance? English law tends to take a much stricter view of clauses that are restricted to events that prevent performance.
Does the clause say what happens if the clause is engaged? For example, does it just suspend performance for a period of time, permit termination or cater for payments and other performance already made?
Does the clause require a notice to be given to the other party before it can be relied upon? Care is needed here because some contracts require a notice to be given immediately and a failure to do so may mean that the ability to rely on the clause is lost.

Then, looking at how that interpretation is relevant to your circumstances, consider the following questions:

How is your ability to perform the contract in fact being affected by the present conflict? Is performance completely prevented or is it merely impaired (capacity to perform is reduced or delayed)?
Can the contract be performed in a different way or in part?



Business Interruption and Supply Chain Disruption

There is already significant disruption to shipping routes, energy supplies, and broader supply chains across the region. Businesses that depend on the transit of goods through the Strait of Hormuz or other affected areas face the prospect of delays, increased costs and interruption to their operations. Where contracts contain liquidated damages or time- of-the-essence provisions, parties may face significant liability for delays that are ultimately attributable to the conflict.

Proactive engagement with counterparties is advisable. Parties should consider whether contractual variation or standstill agreements may be appropriate to preserve commercial relationships while the situation remains fluid. Documentation of all disruptions, mitigation efforts, and communications with counterparties will be critical in the event of any subsequent dispute.




Insurance

Standard property and business interruption policies frequently contain war exclusions, which may limit or eliminate cover for losses arising from the conflict. Businesses should review their policies urgently to understand the scope of any exclusions and to determine whether separate war risk, political risk, or terrorism insurance is in place or available.

In the marine and aviation sectors, war risk premiums have already risen sharply, and insurers may seek to impose additional exclusions or restrict coverage in respect of vessels, aircraft, and cargo transiting affected areas. Parties should monitor these developments and factor increased insurance costs into their commercial planning. Where losses do arise, prompt notification to insurers in accordance with policy terms is essential to preserve the right to claim.

In addition, the crisis is heightening credit risk across supply chains, with increased likelihood of customer insolvencies, payment defaults, and contract frustration. As a result, trade credit insurers may reduce credit limits, withdraw cover for higher‑risk jurisdictions, or impose more restrictive terms, potentially affecting liquidity and working capital management for businesses. Alongside financial and operational exposures, geopolitical crises frequently trigger a surge in cyberattacks, including state‑linked or politically motivated intrusions. Cyber policies now often contain war‑related or nation‑state exclusions that may limit coverage for attacks perceived to be connected to hostile state activity. Businesses should therefore review their cyber policies to understand where exclusions may apply and whether supplemental cyber‑war or critical‑infrastructure endorsements are required. Strengthening internal cyber‑resilience, incident‑response procedures, and data‑backup protocols is equally important to ensure both insurability and operational continuity during periods of elevated threat.

Where cyberattacks result in material disruption, such as system outages, data corruption, or operational downtime, cyber policies may offer a route to recover business interruption losses, provided the triggering event falls within the policy’s insuring clause and is not excluded. Given the elevated threat environment, organisations should ensure that any notification requirements are followed promptly, as delays can jeopardise coverage for BI losses arising from cyber incidents.

Finally, events that qualify as force majeure may not meet the requirements for an insurance claim, so it is important to  assess contractual and insurance positions in parallel. 




Practical Steps for Businesses

In light of the above, businesses operating in the Middle East, or with exposure to the region, may consider taking the following practical steps:

Conduct a comprehensive review of all contracts with exposure to the affected region, paying particular attention to force majeure, sanctions, termination, and insurance provisions.
Ensure that all notice requirements are identified and complied with.
Engage with counterparties early and constructively to manage disruption collaboratively where possible.
Monitor the sanctions landscape and take legal advice on compliance obligations.
Review existing insurance coverage and conduct a policy gap analysis (property, business interruption, cyber, political risk, trade credit). Engage with brokers regarding the availability of additional war risk or political risk cover, if necessary.
Review and strengthen cyber resilience, incident response procedures, and data backup protocols.
Ensure that you notify any claims promptly to insurers. Policies usually have strict reporting timelines.
For those involved in transactions that remain under negotiation, reassess valuations and negotiate appropriate contractual protections to allocate the risks arising from the crisis.



Conclusion

The Middle East crisis presents a complex and rapidly evolving set of legal challenges for commercial entities. While general concepts in English law provide a framework for addressing many of these issues, the best protections are likely to lie in robust contractual drafting and appropriate insurance policies. Businesses that act swiftly to understand their legal position, engage with counterparties, and take proactive steps to mitigate risk will be best placed to navigate the uncertainty ahead.