The conflict in the Middle East has disrupted critical maritime corridors, driven up fuel and insurance costs, and destabilised both air and sea freight networks. Together, these pressures are having a significant impact on goods moving in and out of New Zealand.
We take a look at the implications of the conflict on the freight and logistics sector, and how the insurance sector has responded accordingly.
Impact of force majeure clauses
A force majeure event occurs where the shipping line is freed from its delivery obligations, as a result of unforeseen events such as war, severe weather or natural disaster. A force majeure clause in a shipping contract protects parties from liability when such an event occurs, essentially relying on the fact that the contractual obligations could not be carried out for reasons out of that party’s control.
The most obvious impact of a shipping line invoking a force majeure clause is delivery delay. For perishable stock this is a significant issue, with non-delivery, or delayed delivery of goods in some cases rendering these unusable. For the New Zealand market in particular, RNZ have reported New Zealand freight companies experiencing the effects of delays created by force majeure clauses, with cargo being dropped off at the nearest safe port. In these instances, freight companies must navigate the challenge of arranging their cargo to be loaded onto another ship and safely rerouted.
In the New Zealand market, the invoking of force majeure clauses could further contribute to the tightening of fuel supplies, should crude oil exports from the Middle East be impacted. While New Zealand no longer imports crude oil directly, oil refineries in Asian countries that supply the New Zealand market will be required to compete for oil from other sources if the Middle East supply is reduced.
While force majeure clauses have been relied on to an extent where acts of war create genuine impossibility in fulfilling an import / export contract, as the situation in the Middle East begins to stabilise, extreme care will need to be taken in relying on these clauses. Recent case law has upheld the principle that, in order to rely on a force majeure clause, performance of the contract must be physically or legally impossible, not merely more difficult or unprofitable. For a transport operator experiencing the effects of a sudden spike in fuel costs and thereby a reduced profit margin in existing transport agreements, re-negotiating existing service agreements is likely to be a better tactic than attempting to invoke force majeure.
Impact on premiums for vessels travelling through high-risk areas
With the war in the Middle East significantly increasing the risk of harm to vessels travelling through these regions, the international insurance industry has responded by expanding the range of locations meeting the definition of geographic risk areas. A geographic risk area is a specific maritime zone or region where vessels, cargo and crew face elevated hazards due to factors such as war, terrorism, piracy or political instability.
The International Underwriting Association of London and Lloyds Joint War Committee (JWC) have categorised a number of geographic risk areas, most recently updated on 3 March 2026. This added Bahrain, Djibouti, Kuwait, Oman and Qatar to the JWC listed areas, and amended the areas included in the JWC for the Persian/Arabian Gulf, Gulf of Oman, Indian Ocean, Gulf of Aden and Southern Red Sea.
Where a port, place or coast is featured on a JWC risk list, shipowners with vessels travelling through these areas are required to pay war risk premiums. With a significant increase in war risk to vessels travelling through these areas, war risk premiums for these voyages have increased significantly. US broker Marsh McLennan has reported that premiums which previously averaged 0.2-0.25% of a vessel’s value, have recently sat at1-1.5%. For a vessel worth $100,000,000, this is a cost of $1.5 million per voyage. This is a significant cost to the freight and logistics sector which will inevitably be passed down to the consumer.
War risk insurance cancellation notices
Although the Strait of Hormuz cannot be legally closed, when insurers consider the risk is too high to provide war risk coverage, vessel journeys through the strait decrease dramatically where vessel owners are unable to obtain appropriate war risk insurance. Without war risk insurance, shipowners bear significant risk of liability for damage, loss or salvage. In addition, without war risk insurance, shipowners may face significant difficulties in obtaining the relevant permits to pass through a particular area.
Some shipping lines are experiencing the effects of their war risk coverage being cancelled as a result of the conflict, following the targeting of merchant vessels. While cancellation notices do not apply where a vessel is already in transit, it means that after the cancellation comes into effect, no new war risk cover will apply.
Some insurers are still willing to provide war risk coverage on a voyage-specific basis; however, the cost of this is now greater.
The Middle East conflict is an ever-evolving situation. Talks of ceasefire and negotiations to reopen the Strait of Hormuz create a degree of optimism; however, in the meantime, New Zealand’s import and export networks will continue to feel the pressure.
Special thanks to Partner Rob Coltman and Associate Olivia Skelton for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
