Navigating a de facto closure

Legal and contractual risks in the Strait of Hormuz

By Carly Fields

The global shipping industry is currently wrestling with a significant escalation of geopolitical tension in the Middle East following the reported de facto closure of the Strait of Hormuz. While the UK Maritime Trade Operations (UKMTO) has clarified that VHF broadcasts indicating a closure are "not legally binding" under international law and the United Nations Convention on the Law of the Sea (UNCLOS), the practical reality on the water is one of severe disruption. As of early March 2026, the Joint Maritime Information Centre (JMIC) had upgraded its regional risk assessment to "critical," indicating that further attacks on commercial vessels are "almost certain".

For shipowners, charterers, and cargo interests, this "previously theoretical risk has now begun to materialise", according to lawyers at Hill Dickinson. 

as parties scramble to interpret charterparty provisions in a landscape where "any interruption of oil and gas shipments through this chokepoint unavoidably sends shockwaves through global supply chains".

Contractual allocation of risk

The immediate focus for the industry lies in the interpretation of war risk clauses. Under unamended BIMCO wordings, such as CONWARTIME and VOYWAR 2025, owners may be contractually justified in refusing orders to proceed to the region. These clauses generally entitle owners to refuse orders if, in the "Master’s reasonable judgement”, the vessel may be exposed to war risks. Hill Dickinson’s lawyers note that under the 2025 revised wording, this right applies "regardless of whether the relevant risk existed when the charterparty was concluded or arose only thereafter".

A parallel concern involves the warranty of a "safe port." A port may be deemed legally unsafe if the only approach is "blocked by military force or credible threats of seizure or missile attacks". Consequently, owners under time charterparties may be entitled to reject nominations for ports requiring a transit through the Strait. Under voyage charters, the obligation may shift to proceeding only "as near as the vessel may safely get".

With reports of "unequivocal threats issued by the Iranian military forces" and escalating attacks resulting in casualties, many operators are opting to deviate around the Cape of Good Hope. 

In the absence of an express "liberty clause" that redefining the contractual route, carriers have an implied right—and obligation—to deviate for the safety of the vessel, crew, and cargo.

However, Watson Farley & Williams (WFW) partner Natalie Jackson and associate Iliana Mastoraki warn that "an unreasonable deviation may deprive the carrier of contractual rights and may result in P&I cover being lost". To mitigate this exposure, owners are advised to "record their reasoning " and maintain continuous co-operation with charterers and cargo interests.

Force majeure and frustration

As the situation remains in flux, stakeholders are evaluating whether contracts have been frustrated or if force majeure clauses can be invoked. Force majeure does not apply by operation of law and must be "expressly incorporated into the contract", says Hill Dickinson. In contrast, the doctrine of frustration applies when a supervening event "fundamentally alters the nature of the performance, rendering it impossible, illegal or radically different".

Legal counsel cautions that delay alone rarely frustrates a contract unless it is of "sufficient duration". Given that the current hostilities could last days, weeks or months, parties are often advised to "wait and see" before treating a contract as discharged. Furthermore, if a contract already contains a specific war risks clause, the doctrine of frustration is unlikely to apply, as the parties are "held to the contractual allocation of risk", Hill Dickinson said.

Several insurers have issued cancellation notices with the intent to reissue cover at "substantially higher war risk rates”, while others may refuse to write such risks entirely. This has placed a new burden on owners, who must now demonstrate "reasonable endeavours" to obtain competitive insurance terms. Hill Dickinson emphasises that "owners should ensure they collate robust evidence demonstrating that they exercised reasonable efforts to obtain cover on reasonable terms" to justify the recovery of increased premiums from charterers.

For vessels already in the region, "Blocking and Trapping" cover has become "particularly relevant”, notes Hill Dickinson as approximately 170 container vessels are reportedly trapped inside the Persian Gulf.

Operational and environmental consequences

The shift to longer transit routes—adding up to two weeks to voyage times—is exerting "upward pressure on freight rates", Hill Dickinson notes. Beyond the financial cost, these diversions have environmental regulatory implications. The increased distances and higher speeds required to meet delivery commitments "are likely to also increase carbon intensity". Under the BIMCO CII Operations Clause 2022, while a Master may deviate for safety, parties must review their contracts to determine if "indemnities or other protections are needed for any negative impact on a vessel’s CII rating", the lawyer said.

In summary, the "prevailing uncertainty is significantly increasing the parties’ overall risk exposure", Hill Dickinson said. As senior IRGC officials issue statements such as, "The strait is closed. If anyone tries to pass... [we] will set those ships ablaze," the industry must move beyond reactive measures. Success in navigating this crisis will depend on a "rigorous and continuous factual assessment" of both the security environment and the specific language of maritime contracts.