When Energy Prices Spike: Emerging Claims and Remedies in Times of Conflict

The regional conflict in the Middle East, which began in late February 2026, led to significant volatility in global oil prices. Hostilities have disrupted key oil trade routes and increased risks to critical energy infrastructure across the Gulf, particularly in the Strait of Hormuz, through which approximately a fifth of the world’s oil and liquefied natural gas (LNG) transits.¹

As a result, oil prices surged from approximately $60 per barrel to around $120, surpassing the $100 threshold for the first time since 2022.² Analysts warn prices could reach $150–$185 if the 8 April 2026 ceasefire does not result in a permanent resolution and disruption persists.

These developments have placed pressure on supply chains across energy-reliant industries globally and are likely to give rise to a wide range of claims, including, in particular:

• in the energy industry, claims under long-term supply agreements concerning non-delivery, price renegotiation, and the operation of indexation mechanisms;
• in the shipping and logistics industry, claims arising from disruption to transit through the Strait of Hormuz, including laytime, demurrage, deviation, and insurance-related issues;
• in the construction industry, claims for additional payment or extensions of time due to increased input costs and supply chain delays, and disputes over the application of price adjustment or force majeure provisions under standard forms;
• in the manufacturing industry, claims arising from delayed or failed delivery of energy-intensive inputs; and
• in the insurance industry, coverage disputes concerning war-risk exclusions, business interruption, and policy responses to conflict-related events.

These claims bring parties’ rights and obligations into sharp focus, and their outcome will inevitably turn on the contractual mechanisms agreed and, where relevant, the governing law. We consider in this article the most common contractual and legal mechanisms engaged in this context — namely price adjustment clauses, force majeure, hardship and exceptional circumstances doctrines.

Price Adjustment Clauses

Parties seeking to bring claims arising from the current conflict will typically look first to the contractual mechanisms agreed to address fluctuations in costs, usually in the form of price adjustment clauses.

Price adjustment clauses are contractual provisions that allow modification of the contract price to reflect changes in the cost of key inputs such as crude oil, refined petroleum products and natural gas. They are commonly found in long-term supply agreements, construction contracts, and other arrangements in energy-intensive sectors, including petrochemicals, manufacturing, and transport.

These clauses are typically triggered by reference to agreed benchmarks, published indices, or periodic review mechanisms. When engaged, they operate to adjust the contract price in accordance with parameters established by the parties, thereby preserving the economic balance of the contract.

The current volatility is likely to engage these mechanisms across a significant number of agreements, whether automatically or by entitling a party to request a formal price review.

Where a price adjustment clause exists, it provides a valuable contractual tool for managing the financial impact of the current conflict. That said, the outcome of claims in reliance on such clauses will depend on whether the contractual trigger has been satisfied and the extent of any adjustment permitted under the agreed mechanisms, including any caps, floors or review provisions.

Force Majeure

Where contractual price adjustment mechanisms were not agreed, or do not fully address the impact of the current disruption, parties are likely to look to force majeure provisions primarily in their contract and, in some jurisdictions, under the governing law.

Unlike the Covid-19 pandemic, which gave rise to considerable uncertainty as to the application of such clauses, the current conflict is of a type commonly contemplated by force majeure provisions. Armed conflict, blockade, and government action are among the most commonly listed force majeure events in commercial contracts, meaning force majeure is likely to be at the forefront of contractual claims arising from this crisis.

Under English law, force majeure is a purely contractual concept, with no relief available in the absence of an express clause. A party seeking to rely on such a provision must demonstrate that the relevant event falls within the contractual definition of force majeure. Typically, the event must be beyond the reasonable control of the affected party and must have rendered performance impossible or physically prevented it, although some clauses adopt a lower threshold requiring only that performance has been hindered or delayed. The distinction is critical: a party facing significantly increased costs, but still capable of performance, may struggle to invoke a clause requiring impossibility.

Force majeure clauses also generally impose a duty to mitigate, with the affected party expected to take reasonable steps to overcome or minimise the impact of the event. Failure to do so may limit or defeat any entitlement to relief.

In the United Arab Emirates (“UAE”), force majeure is recognised as a general doctrine under Federal Law No. 5 of 1985, issuing the Civil Transactions Law (the “Civil Code”).We note that Federal Decree-Law No. 25 of 2025, issuing a new Civil Transactions Law (the “New Civil Code”), will come into effect on 1 June 2026. For a detailed commentary on the New Civil Code, see our compendium here.

The Civil Code does not prescribe a fixed definition of force majeure, instead setting a high threshold of impossibility and leaving its application to be determined by the court on the facts of each case.

The principal provision is Article 273³, which provides that where a force majeure event renders performance wholly impossible, the parties’ reciprocal obligations are extinguished and the contract is automatically dissolved. Where performance is only partially impossible, the corresponding part of the obligation falls away, and the creditor may rescind the contract, subject to notification to the debtor. In cases of temporary impossibility affecting ongoing contracts, the obligation is treated as extinguished for the relevant period, and the creditor may likewise rescind the contract.

This framework is reinforced by other provisions of the Civil Code. Article 287⁴ relieves a party from liability where damage arises from a foreign cause beyond its control, including force majeure, and Article 472⁵ provides that a right is extinguished where performance becomes impossible due to such a cause.

The threshold for force majeure under UAE law therefore remains high. A party whose obligations have become more difficult or expensive to perform — but which remain capable of being performed — is unlikely to succeed in a force majeure claim rooted in the provisions of law.

The outcome of claims in reliance on force majeure will thus depend on whether the event falls within the contractual definition, whether the applicable threshold (e.g. impossibility) has been met, and whether the affected party has complied with its mitigation obligations.

Frustration and Exceptional Circumstances

Parties affected by the current conflict may also seek to rely on doctrines available under the applicable governing law, such as frustration, or exceptional circumstances.

Under English law, the doctrine of frustration applies where a supervening event renders performance impossible, illegal, or radically different from what was contemplated at the time of contracting. The threshold is notoriously high: a mere increase in cost, even a substantial one, is unlikely to suffice. However, where the conflict has rendered performance physically impossible — for example, where agreed routes of shipment are no longer available — frustration may be arguable depending on the facts.

Under UAE law, the equivalent doctrine is that of exceptional circumstances, as set out in Article 249⁶ of the Civil Code. Article 249 provides that where exceptional, general circumstances arise that could not reasonably have been foreseen at the time of contracting, and their occurrence renders performance onerous to the extent that the debtor is exposed to exorbitant loss, the court may, after balancing the interests of both parties, reduce the obligation that has become excessive to a reasonable level.

In the New Civil Code, this principle is also reflected in Article 829⁷ specifically in the context of contract agreements (including construction contracts). Where exceptional, general circumstances disrupt the contractual equilibrium between the employer and the contractor, and undermine the financial basis of the contract, the court may order the restoration of that equilibrium, including by extending the time for performance, adjusting remuneration, or ordering rescission.

Unlike force majeure, this doctrine does not require impossibility; it is sufficient that performance has become excessively burdensome.

Although the sharp fluctuations in energy costs arising from the current conflict, together with disruption to key export routes, may provide a basis for invoking these doctrines, depending on the circumstances, the outcome of claims in reliance on frustration (under English law) or exceptional circumstances (under UAE law) will depend on whether the applicable legal threshold has been met — i.e., whether performance has become impossible or radically different, or, in the case of UAE law, sufficiently onerous as to justify judicial intervention.

The mechanisms considered above are among the most common contractual and legal tools engaged in the context of profound market disruption; however, the outcome of any claim will ultimately turn on the specific terms of the contract and the applicable governing law, thereby testing the robustness of contractual risk allocation and the limits of available relief. Against this backdrop, early and careful consideration of contractual entitlements and potential avenues for relief will be key for commercial parties globally as the situation continues to evolve.

¹Jillian Ambrose, ‘Oil prices ‘could breach $100 a barrel within days’ amid supply disruption from Iran war’ The Guardian (8 Mar 2026) www.theguardian.com/business/2026/mar/08/oil-prices-supply-disruption-iran-war-goldman-sachs; Brad Plumer, ‘Short of Ending Iran Conflict, Trump Has Limited Tools to Lower Oil Prices’ The New York Times (9 Mar. 2026) www.nytimes.com/2026/03/09/climate/gasoline-oil-prices-iran.html.

²Jillian Ambrose, ‘US stock markets close on high after Iran war drove oil prices above $100 a barrel’ The Guardian (9 Mar 2026) www.theguardian.com/business/2026/mar/09/iran-war-drives-oil-price-above-100-a-barrel-for-first-time-since-2022.

³Article 273 of the Civil Code: “In a binding bilateral contract, and in case of force majeure making the performance of an obligation impossible, the corresponding obligation is extinguished and the contract is “ipso facto” rescinded. If the impossibility is partial, the consideration for the impossible part shall be extinguished. This shall also apply on the provisional impossibility in continuous contracts and, in both cases the creditor may rescind the contract provided the debtor is aware thereof.”

⁴Article 249 of the Civil Code: “Unless otherwise provided in the law or the agreement, a person is not bound to repair the prejudice, if he proves that it resulted from a cause beyond his control, such as a heavenly blight, sudden foreign cause, force majeure, the fault of others or of the victim. .”

⁵Article 472 of the Civil Code: “A right is extinguished if the debtor establishes that its performance has become impossible for him due to a foreign cause beyond his control.”

⁶Article 249 of the Civil Code: “When as a result of general exceptional and unpredictable events, the performance of the contractual obligation, without being impossible, becomes excessively onerous in such a way as to threaten the debtor with exorbitant loss, the judge may, if justice so requires, and according to circumstances and after taking into consideration the interests of both parties, reduce to reasonable limits the obligation that has become excessive.”

⁷Article 829 of the New Civil Code: “1. If the Contract Agreements is concluded pursuant to an agreed design for a lump sum remuneration, the contractor may not claim any increase in remuneration even if the prices of materials used in the work increase, or workers’ wages or other expenses increase. 2. If an alteration or addition occurs to the design, the contractor may not claim any increase in remuneration unless this is attributable to the employer’s fault or was with his permission and the contractor agreed with him on the increase in remuneration. 3. If contractual equilibrium between the obligations of both the employer and the contractor breaks down by reason of exceptional general circumstances that could not reasonably have been anticipated at the time of contracting and the financial basis on which the Contract Agreements was founded thereby collapses, the court may, according to the circumstances and after balancing the interests of the parties, order restoration of contractual equilibrium, including extension of the performance period, increase or decrease of remuneration, or order rescission of the contract.”

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.