Introduction

On April 29, 2026, the Department of Expenditure, Ministry of Finance, Government of India, issued an Office Memorandum (“April 2026 OM”) formally authorising the invocation of force majeure for government contracts affected by the West Asia conflict, classifying the prevailing situation as “war.” The April 2026 OM permitted procuring entities to grant extensions of 2 (two) to 4 (four) months, on a case-by-case basis, to firms not already in default of their obligations under the respective government contracts as of February 27, 2026. The April 2026 OM was issued in response to a cascade of supply chain disruptions triggered by the military strikes on Iran that began on February 28, 2026, and the Iranian retaliation that followed.

While the government’s intervention was necessary, it leads us to a deeper paradox in the force majeure doctrine: when a disruption is not isolated to one party or one contract but is systemic, like the current crisis, impacting shipping lanes, energy markets, component suppliers, and logistics hubs simultaneously; whom does the invocation of force majeure under a single contract actually relieve? The doctrine presupposes a binary structure: an “affected party” which is unable to perform, and an “unaffected counterparty” in a position to grant relief or absorb delay. When the entire supply chain is the affected party, this binary system collapses, and force majeure becomes structurally mismatched to the disruption it seeks to address. This article examines why.

The Conflict in West Asia and its Impact on the Supply Chain

The war has created one of the largest supply chain disruptions in the history of the global oil market as Iran’s tightening control over the Strait of Hormuz has nearly halted tanker movement through the passage, with pre-war traffic of roughly 178 (one hundred and seventy eight) daily vessels reportedly falling by about 95% (ninety five percent) since the onset of the war. The situation remains highly fluid and rapidly evolving, with reports regarding the operational status of the Strait of Hormuz changing frequently and concerns over the safety and security of mariners operating in the region continuing to escalate.

The disruption has not remained confined to oil. In Bahrain, the state oil company BAPCO declared force majeure on shipments after Iranian strikes set fire to its largest oil facility. Qatar halted LNG production and declared force majeure after attacks on its facilities, leading to gas supply disruptions expected to last weeks or longer. India, which sources over 40% (forty percent) of its oil imports from the Middle East, faced acute pressure on its supply lines, while about 70% (seventy percent) of its crude imports now bypass the Strait of Hormuz, the primary exposure has been in relation to liquefied petroleum gas (LPG), roughly 90% (ninety percent) of which is routed through this corridor.

The conflict has also caused significant disruption to global supply chains, leading to shortages and increased costs across sectors ranging from semiconductors to heavy industry. For Indian industries, the downstream effects have been severe. In particular, India’s information technology, defence and electronics manufacturing sectors have suffered the impact of delayed or unavailable raw material.. The MUFG Research note on the crisis[1] observed that the disruption could morph into something akin to COVID lockdowns – higher commodity prices coupled with production and supply chain disruptions across sectors, but concentrated in specific, energy-intensive sectors given the very different origin and impact of the crisis.

The argument against contractual force majeure invocations in the current war scenario is that the ‘force majeure’ disruption is not bilateral and does not exist independent of the global supply chain and geopolitical crisis. The disruption faced in individual contracts, is, simultaneously a systemic event affecting every participant in the interlinked global supply chains.

Force Majeure under Indian Law

Under Indian law, force majeure is not an independent statutory doctrine but a contractual mechanism that has evolved through judicial interpretation and is recognised within the framework of contingent contracts under Section 32 of the Indian Contract Act, 1872. The Act principally addresses supervening events through the doctrine of frustration under Section 56, which renders a contract void where performance becomes impossible or unlawful. To avoid automatic discharge and preserve their contractual relationship, parties typically incorporate force majeure clauses as contingent contractual arrangements, the operation of which is governed by Section 32 of the Act. Accordingly, where a contract contains a force majeure clause, the rights and obligations of the parties are determined by the terms of the contract itself, and the application of Section 56 is generally excluded.. In the absence of a contractual force majeure provision, relief may be available s under Section 56. .

The Supreme Court of India has interpreted these provisions in a series of landmark decisions. In Satyabrata Ghose v. Mugneeram Bangur & Co.[2], the Court held that the word “impossible” in Section 56 is not limited to physical or literal impossibility; it encompasses situations where performance becomes impracticable or useless in light of the contract’s purpose. However, the Court also held that courts have no general power to absolve a party from performance merely because it has become onerous on account of an unforeseen turn of events.

In Energy Watchdog v. Central Electricity Regulatory Commission[3], the Supreme Court established three critical principles. First, where a contract contains a force majeure clause, Section 56 has “no application”, and the contractual allocation of risk prevails. Second, mere commercial hardship or increase in cost does not amount to force majeure; performance must be impossible, not merely more expensive. Third, alternative modes of performance, even if costlier, can defeat an impossibility claim – in that case, the availability of coal from other sources, albeit at higher prices, means that the contract was not frustrated.

Indian courts construe force majeure clauses narrowly, as exceptions to the ordinary rule of absolute contractual liability. Invocation requires unforeseeability, direct causation between the event and non-performance, impossibility, and compliance with notice and mitigation obligations. Typical Indian force majeure clauses list events such as war, blockade, embargo, governmental action, natural disasters, and epidemics – events beyond the reasonable control of the affected party. But the listing of “war” in a clause does not automatically trigger relief;, and courts require a clear and proximate causal link between the specific conflict-related event and the affected party’s inability to perform[4].

Global and Domestic Perspectives

Globally, although ‘war’ is a standard enumerated event in Indian force majeure clauses, its mere occurrence does not, by itself, entitle a party to relief. The party invoking the clause must still show that the war has rendered the promised performance impossible or unlawful In other words, the presence of war does not transform every instance of commercial difficulty into a force majeure event; the party invoking the clause must still show that the war, through its various implications, including closure of particular sea lanes, destruction of identified facilities, export bans, or that any direct legal prohibitions has rendered the promised performance impossible or unlawful. This requirement of tight causation does not completely align with the present West Asia crisis, where disruption is often transmitted through multiple layers of the supply chain, and the immediate obstacle to performance, in context of India (which may be a missing component, a cancelled shipment, or an inflated freight quote) is several steps removed from the site of the war itself.

The April 2026 OM can be understood as an institutional acknowledgement of the disconnect between conventional force majeure practices and the current war-driven disruption. By classifying the West Asia conflict as “war” for the purposes of government procurement and authorising procuring entities to grant extensions of 2 (two) to 4 (four) months to non‑defaulting contractors, the April 2026 OM standardises a limited, time‑bound relaxation across an entire portfolio of contracts exposed to the same systemic shock. This move implicitly recognises that a war‑induced supply‑chain crisis of the present magnitude cannot be managed solely through bilateral doctrines that presuppose an unaffected promise or a neutral entity which is solely well-placed to grant contractual relief. It also illustrates the emerging role of the State as a macro risk‑manager in periods of geopolitical upheaval: administrative instruments like the April 2026 OM become necessary to distribute and defer the impact of a common external shock in ways that the traditional force majeure framework, designed for isolated and contract‑specific contingencies, is ill‑equipped to achieve on its own.

The April 2026 OM is also more structured than a blanket extension – while it expects notice of the force majeure event to be given within a reasonable time (with guidance of not later than 14 (fourteen) days after the occurrence), it does not permit retrospective invocation, and it allows either party to terminate the contract where the force majeure condition prevents performance for more than 90 (ninety) days. These features indicate that, rather than simply waiving obligations, the State is seeking to manage the impact of a common external shock in a structured and coordinated manner.

Force majeure, as a doctrine in commercial contracts, remains relevant even in the current context, but its role is narrower and less effective in a system-wide crisis because courts and contracts still abide by traditional notions of party-specific causal link, impossibility or illegality, and compliance with the specific clause’s notice or mitigation procedures. The April 2026 OM, in this regard,  contemplates only temporary and case specific relief measures, and to our knowledge, no general extension of the April 2026 OM has been issued by the Department of Expenditure. Consequently, any relief granted pursuant to the April 2026 OM was inherently time-bound and is now open to reassessment and recalibration in light of prevailing circumstances, particularly given the evolving geopolitical situation and the absence of a complete cessation of hostilities.

War Risk Premiums and Prohibitory Pricing in the Insurance Infrastructure

A particularly significant, yet underexamined dimension of the current supply chain disruption is the effective collapse of the commercial insurance infrastructure that bolsters international trade. Within 72 (seventy two) hours of the commencement of hostilities, the world’s largest marine insurance companies issued notices of cancellation for war risk coverage in the Persian Gulf, effective March 5, 2026. This cancellation impacted the marine insurance and transit insurance for ships set to travel through the Persian Gulf and Oman, with the immediate consequence that such ships remained uninsured, and thus unable to set sail.

For entities which have not cancelled their coverage altogether, insurance has been repriced at prohibitory levels. War risk premiums for vessels transiting the Strait of Hormuz have surged from approximately 0.10–0.25% (zero point one zero percent to zero point two five percent) of vessel value to between 2% (two percent) and 5% (five percent). In absolute terms, insuring a vessel valued at USD 100 million for a single Gulf transit has increased from approximately USD 250,000 to between USD 3 million and USD 5 million per voyage. Leading container carriers have also imposed emergency war risk surcharges ranging between USD 1,500 to USD 4,000 for carriers or containers with standard or specialised equipment – with the quantum of surcharge depending on the significance of the container.

This impact has also, invariably, translated to Indian commerce and foreign trade. India’s exporters are facing 40% – 50% (forty percent to fifty percent) higher insurance charges on Gulf-routed cargoes. Indian small and medium exporters have experienced payment delays and cash-flow stress as war-risk premiums and emergency surcharges drive up the cost of fulfilling existing contractual obligations. The Commerce and Industry Ministry has been compelled to examine interventions on the insurance front in consultation with the Export Credit Guarantee Corporation, and the government has considered a dedicated war-risk coverage policy to support domestic insurers who lack recourse to insurance.

The insurance dimension is critical to the force majeure analysis for two reasons. First, it demonstrates that the disruption extends beyond physical impossibility of performance, and is directly linked to the commercial and financial architecture that enables performance. Second, and more fundamentally, when the insurance market itself withdraws from a corridor – as it has from the Persian Gulf – the question is no longer whether a particular contracting party faces an impediment beyond its control, but the operation of the entire commercial ecosystem is called into question. This systemic withdrawal reinforces the central thesis of this article: force majeure, designed for bilateral isolated impediments, does not entirely capture the wider impairment of a market ecosystem which is struck by geopolitical tension, supply chain disruption, unavailability of raw material, and uninsured, unmitigated risk of loss.

Conclusion

The present West Asia crisis does not render force majeure obsolete, rather, it exposes the doctrine’s structural limits. Force majeure was designed to allocate the risk of an isolated, contract-specific impediment between an affected party and an unaffected counterparty. When a single shock simultaneously strikes shipping, insurance, finance, logistics, and raw-material supply, that bilateral premise no longer holds, as there is no neutral counterparty left to absorb the delay, and the doctrine’s exacting tests of causation, impossibility and mitigation become difficult to satisfy precisely when relief is most needed. The April 2026 OM is an implicit acknowledgement of this mismatch, substituting a standardised, portfolio-wide public-law response for case-by-case private ordering. Yet, it also reveals the limits of contract law. In the face of systemic disruption, the burden of managing economy-wide shocks shifts to the State, while force majeure operates only as a fallback where public intervention is absent. This also exposes a broader limitation of the force majeure doctrine in India – Indian courts have consistently held that force majeure does not apply merely because performance has become more expensive, onerous or commercially unviable, rather, there must be a clear inability or impossibility to perform. As a result, a party that remains technically capable of performing its obligations, but only at a prohibitively high cost due to the economic consequences of war, may find itself without any contractual relief or even insurance coverage (again, given the volatility of the insurance market during the West Asia confilict), precisely in circumstances where the impact of the conflict is most severe. This raises an important question as to whether a narrowly drafted and strictly construed force majeure clause provides meaningful protection in the context of a systemic crisis. In our view, in certain situations, parties may arguably be better served by the absence of a force majeure clause altogether, as this would leave open the possibility of invoking the doctrine of frustration under Section 56 of the Indian Contract Act, 1872, rather than being held to perform a contract that has become commercially unsustainable, even if performance does not become legally impossible.

Footnotes

[1] Accessible at: India – Strait of Hormuz closure: Not just about oil prices for INR – MUFG Research

[2] (AIR 1954 SC 44)

[3] (2017) 14 SCC 80

[4] Halliburton Offshore Services Inc. v. Vedanta Ltd., 2020 SCC OnLine Del 542