Why is this an important issue now?
Following the joint U.S.-Israeli military action against Iran which began on February 28, 2026, Iran’s subsequent strikes on Gulf states and beyond, and the effective closure of the Strait of Hormuz, international businesses are facing potential disruptions and wider economic uncertainty, alongside ever-present concerns about the risks to individuals.
This memo outlines some of the key legal and regulatory issues that international businesses should consider in light of the current situation. It is not exhaustive and not all suggestions will be relevant to all businesses. It is intended to help with planning and responding to the situation.
How does conflict affect commercial operations, supply chains and contractual/legal rights?
- Boards and management teams should understand their relevant contractual rights and obligations:
- Is there a right to claim (or resist a claim) for force majeure (highly dependent on clause/applicable law/circumstances)?
- Is there a right to rely on (or resist counterparty reliance on) material adverse change/material adverse effect (MAC/MAE) or termination provisions?
- Are frustration/unforeseen circumstances/hardship or other doctrines available (highly dependent on applicable law/circumstances)?
- What are the consequences (e.g., is contract discharged, suspended, are delays permitted etc.?)
- Are increased costs recoverable from a counterparty?
- Is change in law relief available where emergency measures are in place?
- Next steps should be considered carefully, including the risks of making the wrong call (legal, commercial, and at a reputational/relationship level).
- Appropriate due diligence should be conducted on alternative suppliers (noting the need for particular care with higher-risk suppliers previously outside a business’s risk tolerance).
- Contingency planning for potential restrictions on supply of energy/materials, including downstream consequences/ability to manage ongoing contractual obligations, should be considered.
- Business leaders should understand the extent of relevant insurance and whether war and political risks are covered, excluded, or require additional premiums:
- Property damage, business interruption, and/or delay in start-up cover.
- Marine hull and/or cargo.
- Aviation.
- Market availability and cost.
- Check any political risk or trade credit insurance.
- Can credit support/performance bonds be called?
- Are there any industry-specific regulatory implications—e.g., the prospect of regulatory reviews of fuel markets?
What about cybersecurity and data considerations?
- The risk of hostile cyberattacks has increased, particularly for critical infrastructure including data centers and cloud services. Boards and management teams should review relevant threat intelligence.
- Heightened vigilance is critical. Businesses should be wary of potential attack vectors, including the use of insecure platforms; and note elevated phishing and social engineering risk, particularly for leadership.
- Teams should carry out targeted checks on critical assets, assess backup immutability, and increase monitoring.
- Government advice should be noted and followed.
- Businesses should respond quickly to unusual/suspicious activity.
How should ongoing transactions and commercial negotiations be dealt with?
- Boards and management teams should consider any sanctions risks presented by new and existing counterparties.
- It is also important to understand the treatment of hostilities in contracts.
- Business leaders should consider:
- Strategic objectives and commercial rationale for investments.
- Appropriate terms/risk allocation (see impact on commercial operations, supply chains, and contractual/legal rights above).
- Alternative or contingency plans/provisions; scope to revisit/renegotiate (see above).
- Check whether governing law, dispute resolution, and notice provisions are still fit for purpose.
- Plan for contingencies:
- Potential delays to regulatory approval processes and extended long-stop dates where counterparties are in the Middle East.
- Practical implications of dealing with counterparties based in the region, e.g., if in-person presence is required.
- Possible difficulties in serving contractual notices in person/by courier on counterparties in the region; check notice provisions and available methods.
How might conflict impact M&A deals?
- Where M&A deals involving counterparties or targets with significant exposure to the region have been signed, boards and management teams should consider:
- Is funding still available?
- Challenges in enforcing generic MAC/MAE clauses/claiming frustration?
- Difficulties complying with specific or “ordinary course” pre-completion covenants?
- Potential delays to merger control or other regulatory approval processes?
- Is it possible to achieve separation and integration?
- Is there potential for renegotiation/disputes?
- Any impact on local completion/share transfer processes?
- Businesses exploring future M&A deals involving counterparties or targets with significant exposure to the region should consider:
- Novel pricing and risk mitigation structures.
- Use of “completion accounts” structures vs. “locked box” structures in uncertain markets.
- Management of counterparty credit risk.
- Representations and warranties/warranty and indemnity insurance: availability, exclusions, and higher pricing.
- Termination rights linked to short-term revenue shortfalls.
- Emergency carve-outs to pre-completion covenants.
- Impact on any government support provided to target.
- MAC/MAE, with focus on what is typically excluded or carved-out from these provisions.
- Governing law and dispute resolution provisions.
What impact could exposure to war have on loan finance?
- Boards and management teams should understand lender drawstop and other rights, and consider potential waiver requests and timeframes: e.g., MAC/MAE, suspension/cessation/curtailing of business, abandonment of projects, etc.
- They should also consider:
- Reinstatement/insurance obligations.
- Reporting obligations.
- Distribution blocks.
- Prepayment provisions.
- Impact on security and secured assets in the region.
- Leaders should understand lender transfer rights.
- Review sanctions and illegality as regulatory landscape potentially changes.
- As far as their financial outlook is concerned, they should consider:
- Impact on cashflows and financial covenants.
- Reserve accounts/liquidity facilities/credit support.
- Future-looking covenants—construction schedules and timing, future reporting obligations.
How about debt capital markets transactions?
- Boards and management teams whose businesses have existing bond issuances should consider:
- Opportunities for debt repurchases and other liability management exercises.
- Impact of rating downgrades on operation of certain terms and conditions; step-up provisions.
- Impact of business disruption on any covenants/financial ratio tests.
- Those contemplating new bond issuances should consider:
- Impact on due diligence questions.
- Appropriate risk factor disclosure.
- Issuance dependent on ability to provide up-to-date prospectus disclosure.
- Need for supplements to update prospectus disclosure package.
- Force majeure/MAC. Though highly dependent on clause/applicable law/circumstances, force majeure and MAC provisions are not likely to be triggered.
- Sanctions risks: these may evolve if new sanctions are introduced or existing sanctions are amended.
- Bear in mind ongoing disclosures for listed issuers under market abuse and other rules.
What about hedging?
- Boards and management teams should consider:
- Oil futures prices and disruption events: impact on commodity derivatives.
- Stop-outs of foreign exchange transactions.
- Volatility driving margin calls.
- Potential terminations:
- Force majeure termination events.
- Other potential events.
- Consensual unwinds to deleverage portfolio and release collateral.
- Process and timeline for converting a missed margin call into an early termination.
- Reservations of rights.
- Close-outs, disputes and record keeping: keep records of decisions and all market data seen, even if not used.
What do business leaders need to consider in relation to potential disputes?
- Understand contractual rights and remedies:
- Breach (including anticipatory breach), damages, termination rights.
- Force majeure/MAC/MAE in contract.
- Frustration/force majeure (at law)/unforeseen circumstances/hardship.
- Good faith duties.
- Illegality (and introduction of new sanctions).
- Consider sending reservation of rights notices, watch out for incoming force majeure and similar notices; check for strict compliance with contractual notice provisions.
- Document decisions carefully.
- Maintain detailed records for evidence purposes.
- Consider whether there is increased reputational risk attached to enforcement options given the circumstances.
What about stakeholder management?
- Consider communications and relationship management with all stakeholders, including:
- Executive management and C-suite.
- Directors.
- Joint ventures/co-investors.
- General counsel.
- Employees.
- Lenders/borrowers.
- Shareholders and investors (query stock exchange announcements).
- Governments.
- Competitors.
- Customers.
- Suppliers.
- External advisors.
- Insurers.
- Establish systems to provide advice and support, reassure employees, and support well-being.
- Reinforce bullying and harassment policies and manage any workplace tensions over the crisis in a way which is consistent with discrimination laws.
Are there any other relevant issues for businesses with a presence in a conflict region?
- People:
- Ensure physical safety of and effective communication with employees; update them on government guidelines/key changes that may need to be implemented in a short timeframe (signed off by appropriate business leads).
- Where relevant, consider working from home/relocation plans (including need to gather accurate records as to employee whereabouts); take into account potential impact on business continuity, data security, tax, and regulatory compliance, maintaining visibility, and effective management.
- Address any recruitment/visa difficulties.
- Remind employees of applicable laws (e.g., relating to content posted on social media and comments made/images shared on WhatsApp/other messaging platforms).
- Raising capital and access to liquidity:
- Consider impact on cost of funds, pricing, and access to capital markets and certainty of lender commitments: MACs, drawdown conditions, broader lender/market sentiment.
- Consider availability of short-term liquidity where required.
- Operational:
- Security of assets and premises and insurance cover for physical damage.
- Business continuity (including whether travel is possible).
- Fraud, anti-corruption and financial crime: businesses may turn to higher risk markets for security of supply, which could present heightened financial crime risks.
- Sanctions: risks and opportunities (e.g., the issuance of general licenses by U.S. authorities might present short-term opportunities in certain sectors (e.g., oil), but compliance and change in law risk must be carefully monitored (e.g., general licenses could be varied and/or terminated without notice)).
- Ongoing board or shareholder meetings to expedite decision-making if required.
- Availability of third parties and their premises, including courts and arbitral tribunals.
- Governance:
- Boards and management teams should consider whether remote arrangements for board and shareholder meetings and corporate decision-making are required, if individuals are unable to travel/meet in person.
- Delegate to sub-committees/individuals where necessary to enact immediate measures and consider whether officers’ terms should be extended.
- Comply with government policy/guidance and with wider duties and obligations to government and stakeholders.
- Check Directors’ and Officers’ insurance policies.
