The Strait of Hormuz Disruptions: Legal Implications for Indian Shipping Contracts

The Strait of Hormuz, through which a substantial portion of global oil and gas trade passes, has been subject to significant disruption arising from the ongoing conflict in West Asia. The IMO Council, in an extraordinary session in March 2026, condemned attacks on commercial vessels and called for a coordinated safe-passage framework. For Indian shipping companies, cargo owners, and energy importers, these disruptions have created a range of legal questions about contractual rights and obligations.

The Commercial Significance for India

India is a major importer of crude oil and liquefied natural gas from Gulf states, much of which passes through the Strait of Hormuz. Disruption to tanker traffic through the Strait affects the price and availability of energy imports and creates operational challenges for Indian shipping companies whose vessels operate in the region.

For Indian cargo owners whose goods are carried by vessels transiting the Strait, the disruptions raise questions about who bears the additional costs and risks arising from rerouting, delays, and the requirement for war risk insurance.

War Risk Clauses in Charter Parties

Most charter parties contain war risk clauses that address how the risk of loss or damage caused by war, hostilities, or warlike operations is allocated between the shipowner and the charterer. The standard CONWARTIME or VOYWAR clauses, which are widely used in international charter parties, give the master and shipowner the right to deviate from the agreed voyage route or to refuse to enter a war risk zone.

Where a shipowner exercises their right under a war risk clause to refuse to enter the Strait of Hormuz or to deviate around the Cape of Good Hope, the charterer faces additional voyage costs — longer voyage time, significantly higher fuel consumption, and potentially delay in delivery of cargo. The question of who bears these additional costs depends on the terms of the specific charter party.

Under a voyage charter, the shipowner generally bears the cost of the vessel but the deviation may affect the freight rate or give rise to disputes about whether the deviation was justified. Under a time charter, the charterer typically pays for fuel and port costs, so the cost of a longer voyage falls more directly on the charterer.

War Risk Insurance

Hull war risk insurance and cargo war risk insurance are separate products from standard marine insurance. The standard Institute Cargo Clauses exclude war risk, which must be separately purchased under Institute War Clauses. The London market, which sets the benchmark for war risk insurance globally, responds to escalating risk in the Strait of Hormuz by adjusting Additional War Risk premiums for vessels transiting the area.

For Indian cargo owners, ensuring that their cargo insurance includes war risk cover for Gulf voyages is important when geopolitical tensions in the region are elevated. The additional premium cost of war risk cover is generally modest compared to the potential loss of cargo in a war risk incident.

Force Majeure in Shipping Contracts

The Strait of Hormuz disruptions raise force majeure questions for shipping contracts where parties are unable to perform because of the security situation. As discussed in the context of Indian contract law, a force majeure argument requires a direct causal link between the triggering event and the inability to perform.

A shipowner who cannot safely transit the Strait of Hormuz because of attacks on vessels has a stronger force majeure argument than a party who simply finds the voyage more expensive or commercially less attractive. The threshold of impossibility rather than mere difficulty applies in Indian law, as in international maritime law generally.

Practical Steps for Affected Parties

Shipping companies and cargo owners affected by Strait of Hormuz disruptions should review their war risk insurance coverage and ensure it is adequate for current conditions. They should examine their charter parties and bills of lading for war risk and deviation clauses and understand their rights and obligations under those provisions. Where disputes about additional costs arise, maintaining detailed records of the decisions made and the reasons for them will be important evidence if the matter goes to arbitration.

Businesses that regularly trade in Gulf region commodities should also review their longer-term supply contracts to ensure that war risk and force majeure provisions adequately address the risks of Strait disruption, which appears likely to remain a feature of Gulf trade for the foreseeable future.