From Clause to Business-Critical Risk
For decades, force majeure provisions in Gulf construction and energy contracts were treated as standard boilerplate, a precautionary formality that nobody expected to invoke. The assumption underpinning this complacency was straightforward: the Gulf was a stable operating environment, its energy infrastructure was a global anchor, and its megaproject pipeline from NEOM in Saudi Arabia to Dubai’s urban expansion was built on the bedrock of reliable hydrocarbon revenues and investor confidence.
That assumption has been abruptly tested given the current regional climate. Force majeure has moved from the footnotes of legal briefings to the front pages of financial news. It is now, unambiguously, a live operational risk.
A Region Under Pressure: The Cascade of Declarations
The trigger for the current crisis was significant. On 4 March 2026, QatarEnergy, responsible for approximately 20% of global liquefied natural gas supply, declared force majeure on all LNG shipments. Within days, Kuwait followed, declaring force majeure on oil sales after cutting output at its fields and refineries. Bahrain’s state energy company, Bapco, subsequently invoked the clause.
The scale of disruption has been extraordinary. Maritime war-risk insurance premiums surged by more than 1,000%, with coverage costs for vessels rising from roughly 0.25% to approximately 3% of a vessel’s value. Asian LNG benchmark prices jumped nearly 70% to over $25 per million British thermal units. Brent crude surged above $114 per barrel, some 60% higher than at the outset of hostilities. Major shipping lines suspended all transits through the Strait of Hormuz, leaving container ships stranded and sending ripple effects through global port networks.
The consequences are not confined to energy markets. Construction projects across the GCC, including infrastructure developments in Saudi Arabia, the UAE, Kuwait, and Qatar, are experiencing delays in materials delivery, cost escalation driven by freight surcharges, disruptions to international personnel movements, and uncertainty over the continuity of subcontractor chains. These developments are no longer theoretical risks. They are live issues affecting ongoing projects today.
What Force Majeure Actually Means and What It Doesn’t
For businesses navigating these circumstances, an understanding of force majeure is essential. The term refers to a contractual provision that excuses a party, in whole or in part, from performing its obligations when an extraordinary event beyond its control renders performance impossible or fundamentally impracticable. However, the legal scope of the clause varies substantially depending on jurisdiction and the precise wording agreed by the parties.
Under English law, force majeure has no automatic legal definition. Its scope depends entirely on the specific language of the contract. A party seeking relief must demonstrate that the event falls within the clause’s definition; that the event has caused the inability to perform, not merely made performance more expensive or commercially disadvantageous; and that the affected party has taken reasonable steps to mitigate the impact. The key threshold is typically whether performance has been prevented rather than merely made more costly.
Under UAE law, parties may have broader recourse even where contracts lack an express force majeure clause. The UAE Civil Code provides statutory mechanisms that may excuse performance when a supervening event renders an obligation impossible or excessively onerous. Kuwait’s Civil Code similarly extinguishes a contractual obligation when performance becomes impossible due to circumstances beyond the obligated party’s reasonable foresight and control and also recognises a hardship doctrine for circumstances in which performance has become unreasonably burdensome.
The Megaproject Dimension: Construction Contracts in the Crosshairs
Gulf megaprojects occupy a distinctive legal and commercial environment. Contracts are typically multi-party, multi-jurisdictional, and long-duration, often governed by frameworks such as FIDIC standard conditions or bespoke employer-drafted documents. Supply chains stretch from East Asia to Europe, with critical materials such as steel, specialist equipment, and chemicals now reliant on shipping lanes subject to severe disruption.
The current crisis is generating a surge in contractual notices across the construction sector. Contractors are sending force majeure notifications to employers; subcontractors are notifying contractors; material suppliers are alerting downstream purchasers. For employers and developers, the challenge is to evaluate the genuine legal merit of these claims while managing project timelines and cost exposure. For contractors, the imperative is to ensure that notices are issued promptly under most force majeure clauses, which impose strict notice periods, and that they are supported by sufficient substantiation to preserve entitlements.
Extension-of-time claims will inevitably follow, along with disputes over prolongation costs, the recovery of escalated material prices, and the question of whether delays triggered by force majeure events entitle contractors to additional compensation or only to relief from liquidated damages. War-risk insurance has also become a critical pressure point. Many standard construction all-risks policies exclude war and acts of hostility, and the dramatic repricing of specialist war-risk coverage and, in some cases, its withdrawal altogether, leaves projects exposed precisely when risk is highest.
Beyond Contracts: Sovereign-Level Force Majeure and Investment Risk
The force majeure dynamic is operating beyond the project level. Multiple Gulf states have begun internal reviews to assess whether the clause can be invoked in broader investment commitments and government contracts, as regional budgets face pressure from declining hydrocarbon revenues, rising defence costs, and disruptions to tourism and aviation. Gulf sovereign wealth funds, which had pledged substantial investment commitments to international counterparties, may face questions about their capacity to honour those obligations in the short term.
This sovereign dimension introduces a new layer of risk for international businesses and investors with contractual relationships with Gulf state entities. Material adverse change clauses are also receiving renewed scrutiny, as parties on both sides of transactions assess whether the current environment meets the threshold for invoking exit rights or renegotiation provisions.
Strategic Responses: What Businesses Must Do Now
The window for protective action is narrow. Businesses with operations, contracts, or supply chains in or through the Gulf should treat the following as immediate priorities.
First, audit your contract portfolio. Identify every agreement with counterparties and locate force majeure clauses, notice provisions, and related risk-allocation mechanisms. Understand whether your governing law is English, UAE, Qatari, Kuwaiti, or another jurisdiction, and what that means for your entitlements.
Second, issue notices promptly. If performance has been affected, do not wait. Most force majeure clauses impose strict notice periods, typically 14 to 28 days from the occurrence of the triggering event. Failure to notify in time can extinguish an otherwise valid claim. Notices should be detailed, specific, and tied to causal chains connecting the conflict to the performance failure.
Third, document everything. The evidential burden in force majeure disputes falls on the party seeking relief. Record all disruptions in real time: delayed deliveries, cost escalations, personnel movement restrictions, insurance changes, and supplier notifications. This contemporaneous record will be essential in any subsequent dispute.
Fourth, mitigate actively and visibly. Force majeure does not relieve a party of the obligation to take reasonable steps to minimise the impact of the triggering event. Identify alternative supply routes, substitute suppliers, and other mitigation measures. Document what has been explored and why alternatives are unavailable or impractical.
Fifth, review your insurance coverage. Engage brokers immediately to clarify which war-risk coverage remains in force, at what premium, and for what period. Consider whether specialist political risk insurance is appropriate for your exposure profile.
Sixth, engage counterparties commercially. In many cases, commercial negotiation, extensions of time, cost-sharing arrangements, and scope adjustments will produce better outcomes than formal legal notices.
Early dialogue is generally preferable to an entrenched dispute. Seventh, seek specialist legal advice. The interaction between force majeure, hardship doctrines, war-risk provisions, insurance policies, and dispute resolution mechanisms is complex. Businesses need advisers with specific knowledge of GCC law, international construction contracts, and dispute resolution in the region.
The Longer View: Rethinking Risk in Gulf Megaprojects
The current crisis will pass; however, future contracts in the region should be drafted with greater care around force majeure provisions: definitions should be precise and comprehensive; notice periods should be realistic; hardship and exceptional circumstances provisions should be considered where applicable law permits; and the interplay with insurance, dispute resolution, and termination rights should be explicitly addressed.
More broadly, businesses operating in the Gulf should build resilience into their operating models: diversified supply chains, financial buffers for cost escalation, genuine political risk insurance programmes, and legal advisory relationships capable of rapid response. Force majeure has demonstrated that it can shift in a matter of days from a theoretical provision to an operational crisis. The businesses that navigate the current disruption best will be those that treated this possibility as real before events forced the issue.
This article is provided for informational purposes and does not constitute legal advice.