Iran conflict: key legal considerations for businesses

The conflict in Iran is affecting businesses through direct regional exposure, supply chain disruption, sanctions risk and insurance gaps. This article offers practical guidance for boards, in-house teams and commercial leaders, focusing on English law contracts and key differences under UAE and Saudi law.

Check your commercial contracts

English law doesn’t automatically provide relief when things go wrong. A force majeure clause will only help if it appears in your contract and the event falls within its wording.

Clauses listing “war,” “hostilities,” “terrorism,” “blockade,” “embargo” or “governmental action” may be triggered by airspace closures, port shutdowns, rerouted shipping or export bans — but the detail matters. Check whether your clause requires performance to be completely prevented or whether hindrance is enough, and whether sanctions, war‑risk premiums or government restrictions are expressly covered.

Relief typically depends on giving timely notice, using reasonable endeavours to mitigate and showing a clear link between the event and the failure to perform. “Reasonable endeavours” won’t usually require you to accept materially worse terms, but it may mean switching routes or suppliers and absorbing proportionate additional cost. Be clear what relief actually looks like: suspension, an extension of time or a temporary price adjustment? Track any long‑stop date after which either party can walk away and maintain a contemporaneous evidence bundle to support any claim.

If your contract lacks a force majeure clause, frustration is the fallback, but the bar is high. It only applies where an unforeseen event makes performance genuinely impossible or transforms the obligation into something radically different. Rising costs or logistical headaches alone will rarely suffice.

Where sanctions directly prohibit the performance you owe, the doctrine of illegality may discharge the obligation entirely. Beyond these doctrines, stress-test any material adverse change clauses, change in law provisions, price adjustment mechanisms and hardship frameworks. If your contracts include variation or re‑sequencing mechanisms, use them proactively to keep delivery on track. Align any adjustments with your financing and insurance covenants — and if any contracts are up for renewal, address these risks before you sign again.

How to review your contracts effectively

Identify your 20 most critical contracts by value and operational dependency and review them now. Build a matrix capturing governing law, dispute forum, performance status, the wording of any force majeure or material adverse change clauses, notice requirements and the evidence you’ll need. Prioritise contracts where performance is actually prevented or unlawful.

Set commercial guardrails so negotiators know their authority limits on delivery re-sequencing, temporary price bands and KPI relaxations. Pay particular attention to change control provisions in outsourcing, IT and long-term service contracts, as these can provide a structured route to adjust scope, timelines and benchmarks without triggering a formal dispute.

Where KPI regimes exist, consider whether current targets remain realistic. If a supplier genuinely can’t meet service levels because of conflict-related disruption, an early, agreed recalibration is almost always preferable to an after-the-fact argument about liquidated damages.

Key differences under UAE and Saudi law

UAE law offers broader statutory protection than English law: obligations may be extinguished or suspended automatically where performance becomes genuinely impossible, and courts can rebalance obligations where exceptional events make performance excessively onerous. Saudi Arabia’s modernised Civil Transactions Law follows broadly similar civil law principles.

In both jurisdictions, bespoke contractual risk allocation will usually take priority over background statutory relief, so the drafting of your clauses remains a key area of focus. English law benefits from decades of settled precedent; UAE and Saudi frameworks are modernising rapidly, but practice can vary between onshore courts, free-zone systems and arbitration. Build periodic scenario reviews and local counsel checkpoints into your processes across all three systems.

Wider business impacts to consider

The Middle East conflict is generating disruption well beyond the region, from sanctions and shipping reroutes to insurance gaps and cyber threats. The sections below address each pressure point:

Sanctions, export controls and payments

UK sanctions targeting Iran are extensive and still evolving, restricting dealings with designated persons, certain sectors and specified goods. Even indirect exposure counts: routing a payment through a sanctioned bank or using a sanctioned port creates real problems. Screen your counterparties and payment routes now.

For high‑value transactions, build in extra time for licensing and bank queries, as many institutions apply conservative over-compliance standards. Watch for export controls on dual‑use items and technology transfers, especially where supply disruption has forced component substitutions. On the finance side, lenders are likely to push for enhanced sanctions undertakings, so check whether existing representations still hold true.

Supply chains and logistics

Airspace restrictions, port congestion and war‑risk rerouting are pushing up lead times and costs. If your sale contracts use Incoterms, check how transport, risk and insurance responsibilities are allocated — mismatches with upstream carriage and insurance arrangements are a common source of disputes. Keep your logistics and legal teams talking to each other.

Check your insurance cover

Review war, terrorism and cyber exclusions across your property, business interruption, cargo, liability and political risk policies. Map your policies against the indemnities, service levels and liquidated damages in your commercial contracts. Where there are gaps, obtain endorsements or renegotiate terms.

For project‑financed assets, confirm compliance with lender insurance covenants. Set clear notification triggers and keep contemporaneous logs.

Cyber risk and operational resilience

Iran‑aligned actors and opportunistic groups have stepped up disruptive cyber activity targeting energy, logistics and financial services. Make sure your incident response plan covers multi‑jurisdictional notification triggers, that vendor contracts allow rapid defensive action and that offline backups are in place.

Given the sanctions overlay, ransom discussions may be legally constrained, so build a pre‑cleared decision framework now rather than assessing exposure for the first time under a live attack.

Changes in banking and trade finance

Banks issuing letters of credit, guarantees and standby facilities are re-pricing or pulling back from higher‑risk routes and counterparties. Expect more intensive due diligence, shorter expiry periods and requests for additional collateral. Test whether your increased cost and illegality provisions are triggered by war‑risk or sanctions‑screening refusals.

In the UAE and Saudi Arabia, conservative bank processing stances can delay settlement even where the legal position would allow performance. Consider alternative instruments such as supply‑chain finance or escrow arrangements, but ensure any workaround satisfies upstream covenants. Where possible, diversify your confirming banks.

Protecting your people and operations

Review travel policies, site access protocols and emergency evacuation plans for any sites exposed to airspace closures or regional unrest. Employers owe a non‑delegable duty of care under English law, with similar principles in the UAE and Saudi Arabia. Build a documentary trail showing dynamic risk assessments and employee consent to redeployments.

Where labour mobilisation is constrained, consider whether KPIs and liquidated damages need temporary flexibility — and if you agree to any relaxation, capture it in a short-form amendment.

Managing disputes strategically

Where you resolve a dispute matters more than ever in a crisis. London arbitration remains attractive for its neutrality, interim relief and enforceability. In the Gulf Cooperation Council (GCC), arbitration under the Dubai International Arbitration Centre (DIAC), Abu Dhabi Global Market (ADGM) and Saudi Center for Commercial Arbitration (SCCA) rules is increasingly sophisticated, though sanctions and asset-flight risk can complicate matters.

Ensure your dispute clauses include practical mechanics for service, virtual hearings and emergency relief. When thinking about enforcement, consider where your counterparty’s assets sit today, not where they were when the deal was signed. Where the relationship remains valuable, structured renegotiations and standstill arrangements can preserve it while protecting your position.

Practical steps to take now

• Map your sanctions and export‑control exposure across counterparties, routes, ports, banks and insurers, and refresh your ‘know your customer’ files
• Triage your top 20 contracts (by value and criticality) under English, UAE and Saudi law for force majeure, illegality, change in law, material adverse change and price‑adjustment rights
• Align your insurance cover, indemnities and service‑level commitments to the current operating reality and close any gaps caused by war‑risk exclusions
• Rehearse your incident response for cyber and logistics shocks, including decision trees for legally constrained ransom scenarios and rapid supplier substitution
• Re‑baseline your dispute strategy around arbitration venue, emergency relief options and enforceability, taking into account where counterparty assets actually sit today
• Review change control provisions and KPI regimes in your key service and outsourcing contracts. Where targets are no longer realistic, agree recalibrated benchmarks before disputes arise.

None of this replaces tailored advice on your specific facts, but early, disciplined action now will preserve your options later. Contracts that were “good enough” yesterday need active stewardship today.

HCR Law has a dedicated International team with strategic focus on the Middle East and regularly advises companies doing business in the region.