Gulf countries, including Qatar, Bahrain and Kuwait, have declared force majeure on gas exports following the United States-Israel war on Iran, now in its third week, and the disruptions to shipping through the Strait of Hormuz, as Tehran has retaliated across the region, targeting US assets.
QatarEnergy was among the first to halt production, shutting down gas liquefaction on March 2 and sending ripples through global energy markets. Kuwait Petroleum Corporation and Bahrain’s Bapco Energies followed days later, while India invoked emergency measures to redirect gas supplies to priority sectors.
Oil prices also soared to more $100 a barrel as war intensified and uncertainty grew over energy shipments through one of the world’s most critical maritime chokepoints.
Here’s what we know about force majeure and what Gulf countries invoking it means for global oil and gas markets.
What is force majeure?
Force majeure, from the French meaning “superior force”, is a clause in contracts that allows a party to be excused from its obligations when an event beyond its control prevents performance.
This legal move can allow a party to suspend its obligations temporarily, be released from them partially or fully, or adjust them to reflect the new circumstances.
Why are Gulf countries invoking force majeure?
Companies in Qatar, Kuwait and Bahrain have invoked it following severe disruptions to shipping through the Strait of Hormuz caused by US-Israeli military strikes against Iran that started on February 28.
Following these attacks, a commander in Iran’s Islamic Revolutionary Guard Corps (IRGC) said on March 2 that the Strait of Hormuz was closed and warned that any vessel attempting to pass through would be attacked, a statement echoed by Iran’s new supreme leader, Mojtaba Khamenei, on Thursday.
As a result, Gulf companies started invoking force majeure, in order “to avoid paying damages or other financial penalties under their contracts”, Ilias Bantekas, a professor of transnational law at Hamad bin Khalifa University in Qatar, told Al Jazeera.
“These companies are most likely unable to fulfil their obligations, for example, to deliver shipments of oil and gas to other countries, or for shippers to transport them across the Arabian Gulf,” he said.
Does war automatically qualify as force majeure?
No. For war to qualify as force majeure, it must either be covered by the contract or actually prevent one or both parties from performing their obligations.
Companies and states typically include force majeure clauses that define which events qualify, meaning that when force majeure is invoked, the parties rely on provisions they previously agreed upon.
“War can always be foreseen, but perhaps not at the level at which it is being waged right now,” Bantekas said, adding that under general contract provisions, ships carrying goods are usually expected to find another route, “even if it is more costly to them”.
“What we could never have foreseen is that the Strait of Hormuz could be closed to shipping altogether, even if Iran were attacked in the brutal way it is now. I think that, on its own, could be sufficient to constitute a force majeure event,” he said.
“However, only a court would have the authority to make a definitive determination as to whether this kind of war, under these particular circumstances, amounts to force majeure,” he added.
Will LNG and oil markets be affected?
Yes. QatarEnergy’s declaration of force majeure alone has already significantly disrupted the global LNG market, as Qatar accounts for nearly 20% of global supply.
Gas prices soared immediately following the country’s halt of gas production, and global gas markets are expected to experience shortages for weeks, if not longer.
“The lack of visibility over the likely duration of force majeure, and of the broader military conflict, is injecting extreme uncertainty into global oil, gas and LNG prices,” Seb Kennedy, global gas and LNG analyst and founder of Energy Flux, told NNAfrica.
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