Force Majeure and the Iran Conflict: What Kiwi Businesses Need to Know

The term force majeure has been cropping up in boardrooms and legal documents with worrying frequency this month. With the latest escalation in the Iran-Israel conflict and the renewed threat to shipping lanes in the Strait of Hormuz, carriers and cargo owners are scrambling to trigger the contractual escape hatch that lets them off the hook when things go pear-shaped. For New Zealand businesses—whether you're importing electronics from Asia or exporting dairy to the UK—understanding how this clause works (and how it gets abused) could mean the difference between riding out the storm and watching your profits take a sharp downturn.

When the World Interrupts Your Supply Chain

At its core, force majeure is the legal equivalent of a shrug—it’s the “act of God” provision that excuses a party from fulfilling a contract when an extraordinary event outside their control throws a spanner in the works. War, terrorism, natural disasters, and yes, sudden sanctions, all fall under this umbrella. But here’s the catch: just because a ship gets delayed in the Red Sea doesn’t automatically mean your supplier can invoke force majeure and walk away. The event has to genuinely make performance impossible, not just more expensive or a bit of a hassle.

This week, several major container lines issued notices declaring force majeure on routes through the Gulf, citing the heightened risk of attacks and the resulting insurance nightmares. And honestly, given the footage coming out of the region, it’s hard to argue with them. But as the situation evolves, some in the shipping industry are already pointing out the potential for misuse—there’s a history of carriers crying “war” when the real problem is simply a shortage of vessels or a commercial decision to reroute for profit. It’s a grey zone that leaves importers stuck with delayed goods and no clear legal footing.

The Sanctions Angle That Complicates Everything

There’s another layer to this that doesn’t get enough airtime: sanctions. When regional conflicts flare up, governments pile on new restrictions faster than you can say “compliance department.” A cargo that was perfectly legal last week might suddenly fall under secondary sanctions if it touches the wrong port or involves a blacklisted entity. This is where the legal definition of force majeure gets murky. Is a new sanctions regime an unforeseeable event? Often, yes. But courts will ask whether you could have mitigated the risk by, say, avoiding that region in the first place.

For New Zealand companies, this is particularly tricky because we’re often navigating a complex web of international sanctions while maintaining our own trade relationships. An Auckland-based trader dealing with a Middle Eastern counterparty might find their contract nullified not by a bomb, but by a compliance letter from their bank. And if they try to invoke an act of God to get out of the deal, they’d better hope the fine print explicitly covers “government orders” and “regulatory changes.”

Three Red Flags to Watch Right Now

If you’re staring at a contract that’s suddenly looking shaky, here are the things you need to check before you sign any force majeure notice—or accept one from a supplier:

• Is it really impossible, or just a bit tough? Your counterparty might claim force majeure because shipping costs tripled. That’s not impossibility; that’s bad luck. Look for the exact wording: does the clause require the event to “prevent” or “hinder” performance? Prevention is a higher bar.
• Did the event predate the contract? If tensions were already simmering when you signed the deal in January, a court might say you assumed the risk. Force majeure is for the unforeseeable, not the inevitable.
• What’s the notice requirement? Most clauses require immediate written notice. If your supplier waits two weeks to tell you they can’t ship, they may have waived their right to claim.

Getting Back to Normal Isn't Coming Soon

Look, we all want to get back to normal—that blissful state where trade flows freely and the only surprises are favourable exchange rates. But the reality is, geopolitical shocks are becoming the new normal. From the Red Sea to the South China Sea, every major shipping lane now carries a risk premium. The smartest play for Kiwi businesses isn’t to hope for calm, but to build contracts that acknowledge the chaos. That means clear force majeure definitions, mandatory insurance clauses, and alternative routing options written right into the agreement.

In the end, force majeure isn’t just a legal technicality; it’s a stress test of your supply chain’s resilience. The companies that come out on top will be the ones that treated the fine print as seriously as the bottom line. And for everyone else? Well, things might just keep heading south until the next crisis hits.