By Kailea Weitz
ASU Law Fellow
The current conflict between Israel, the United States, and Iran quickly evolved beyond geopolitics, rippling through shipping lanes, insurance and energy markets, and cross-border supply contracts. About a quarter of the world’s oil and natural gas supply, and one-third of sea-traded fertilizer, normally moves through the Strait of Hormuz. Its centrality to world shipping places it squarely at the center of the conflict. Maritime traffic in the Strait has nearly halted as energy prices see “wild swings” and food prices are soon to follow.
That disruption matters because legal risk can intensify before any formal closure is declared. Iran has signed but not ratified UNCLOS, has historically disputed its transit-passage regime, and its new supreme leader announced on March 12, 2026, that he would continue to keep the strait blocked. Maritime reports indicate the chokepoint effectively closed “not by Iran, but by shipping itself” due to fears of attack.
Maritime risk allocation is at the heart of the analysis. Once parties conclude that transit through a conflict zone has become dangerous, the key disputes become contractual: may owners refuse orders to proceed, may charterers insist, when is deviation justified, and who bears the delay and added cost if passage becomes effectively uninsurable or materially more hazardous? These are questions not for geopolitics but for transactional drafting language found in shipping and logistics contracts’ “safe port warranties” and “war risk charterparty agreements,” among others. Mondaq’s recent guidance emphasizes careful review of insurance coverages and exclusions, mitigation documentation, sanctions and regulatory compliance, and especially force majeure clauses which vary widely and often turn on whether performance is “prevented,” “hindered,” “delayed,” or only more expensive.
Marine insurance is the other major pressure point. If cover is withdrawn, repriced, or narrowed, risk allocation shifts rapidly through the entire chain of performance. War cover has remained available in the Gulf, but with increasing restrictions and sharply higher pricing. War-risk premiums in the Gulf rose more than 1000% from 0.15-1.25% to highs of 7.5% of vessel value with averages of 2.5% overall and 5% for US/UK/Israeli vessels, with premiums reaching ten times pre-conflict levels and tens of millions per trip. Increases of this magnitude affect whether voyages proceed at all, whether financing remains viable, and whether cargo owners, carriers, or buyers absorb the costs. The U.S. DFC’s Maritime Reinsurance Plan is also rapidly taking shape to restore confidence and resume trade flows by covering losses up to $20 billion in the Gulf. However, safety risk, not absence of insurance, is primarily plummeting transit after four missile strikes on vessels in the Strait and U.S. navy escorts will not be ready to escort vessels for weeks.
The conflict’s most immediate effect may therefore be less a formal closure of the Strait of Hormuz than a private-law reallocation of risk by shipowners, insurers, charterers, lenders, and counterparties. The question is who bears the consequences when the strait remains open as a matter of law but unusable as a matter of commercial reality.