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What the Strait of Hormuz Crisis Means for Oilfield Services Companies Right Now

The Strait of Hormuz has been a theoretical risk in energy markets for decades. In the spring of 2026, it became a very real one. Since late February, when U.S. military operations against Iran triggered the closure of the strait, roughly 20 percent of the world’s seaborne oil supply has been disrupted—what the International Energy Agency has called the largest supply disruption in the history of the global oil market. For oilfield services companies, the consequences are still unfolding, and the legal questions they raise are not theoretical either.

The Operational Reality

Before the conflict, about 20 to 25 percent of the world’s seaborne crude oil and 20 percent of global LNG volumes transited the Strait each year. Within days of the conflict’s outbreak, tanker traffic through the strait collapsed, with shipments restricted by more than 90 percent—roughly 10 million barrels per day of production disrupted. Brent crude surpassed $100 per barrel for the first time in nearly four years by mid-March, and prices have remained volatile, with WTI trading between $80 and $97 per barrel through April as the market reacts to ceasefire talks and setbacks—and spiking back above $96 as recently as this week as the ceasefire remains fragile. Rystad Energy has estimated it could take until July for oil flows to recover to even 90 percent of pre-war levels, with another two months for those barrels to reach refineries.

For oilfield services companies, the immediate effects are hitting on multiple fronts. Steel prices were already elevated before the conflict; the 25 percent Section 232 steel tariffs imposed earlier in 2025 had pushed hot-rolled coil steel to around $890 per short ton, a 15 percent increase from 2024 averages per S&P Global Commodity Insights. Steel tariffs alone were adding an estimated $1 to $2 million per deepwater well. The Hormuz disruption adds a supply shock on top of an existing cost-pressure environment. Shipping insurance rates, which had been rising since early 2026, surged by four to six times within weeks of the conflict’s start. Equipment deliveries are delayed. Project timelines are slipping.

The Legal Questions Your Contracts Are About to Face

When the market shifts this dramatically and this quickly, contracts that looked reasonable six months ago suddenly need a second look. Three legal issues are surfacing in nearly every conversation I’m having with clients right now.

Force Majeure

The question on everyone’s desk is whether a military conflict closing a major international waterway qualifies as a force majeure event. Under Texas law—governing law for many oilfield services agreements—force majeure clauses are strictly construed against the party invoking them. The clause has to specifically cover the event, the event has to have actually prevented (not merely made more expensive) the party’s performance, and the affected party generally has to demonstrate it couldn’t have planned around the disruption.

A military conflict of this scale—one triggering a U.S. government-declared national emergency and causing a 90-plus percent collapse in strait traffic—has a stronger claim to force majeure protection than tariff-driven cost increases alone. Courts have consistently held that economic hardship by itself doesn’t qualify. But genuine impossibility of performance, caused by an event specifically listed in the contract (such as “acts of war,” “government orders,” or “military conflict”), is a different matter. The critical variable is always the specific contract language. A clause that lists “acts of God” but omits “military conflict” puts the claiming party in a much weaker position than one with a broad government-action trigger.

If you’re considering invoking a force majeure clause, notice requirements matter enormously. Most contracts require timely written notice and evidence of reasonable mitigation efforts. Missing those procedural steps can defeat an otherwise valid force majeure claim regardless of the underlying facts.

Price Escalation and Change-in-Law Provisions

Many oilfield services contracts were drafted when steel prices, shipping costs, and insurance rates were materially different from where they sit today. If your agreement includes a price escalation clause—one that triggers renegotiation when input costs exceed a defined threshold—now is the time to check whether current market conditions have crossed that line. The same is true for change-in-law provisions, which some energy contracts use to address unexpected regulatory or governmental shifts that affect the economics of performance. A closure of the Strait of Hormuz backed by government military action could, depending on the clause’s language, constitute exactly that kind of change.

Termination-for-Convenience and Material Adverse Change

Some clients are looking at their termination provisions not because they want to exit a relationship, but because they need to understand their exposure if a counterparty tries to exit first. When a project’s cost structure deteriorates sharply—because equipment is delayed, insurance costs triple, or critical materials can’t be sourced—operators sometimes explore whether they can terminate a services agreement without penalty. The answer depends almost entirely on what the contract says. Termination-for-convenience clauses give operators that flexibility explicitly. Material adverse change provisions can sometimes be invoked when project economics shift fundamentally. If you’re a services provider, knowing whether those exits are available to your clients—and whether you have corresponding rights—is essential information right now.

What This Means Practically

The market backdrop creates a specific kind of risk for oilfield services companies. Operators facing project cost increases of 4 to 40 percent (the range estimated by Deloitte for tariff-affected supply chains, before the Hormuz disruption) will be looking for contractual levers to reduce exposure. Services companies are often on the receiving end of those efforts. At the same time, services companies face their own upstream cost pressures—higher steel costs, delayed equipment, insurance surcharges—that may affect their ability to perform on existing contracts at agreed-upon rates.

A few practical steps are worth taking now, regardless of whether you currently have an active dispute:

Review your active service agreements to identify how force majeure is defined, whether the triggering language is broad or narrow, and what notice and mitigation requirements apply. Pay particular attention to whether “government action,” “military conflict,” or “war” are listed events, or whether the clause relies solely on a general catch-all.

Document your cost increases and supply chain disruptions with specificity. If a force majeure or price escalation claim becomes necessary, contemporaneous records of when disruptions started, what costs increased, and what alternatives you pursued are far more persuasive than reconstructed timelines.

Update your contract templates for new agreements. The current environment has made clear that tariffs, military conflict, and government-ordered shipping restrictions belong in oilfield services contracts—both as listed force majeure events and as triggers for price escalation. Contracts drafted in 2022 or 2023 almost certainly don’t address all of them adequately.

The Bigger Picture

The energy industry has navigated price collapses, pandemics, trade wars, and geopolitical shocks before. What tends to separate companies that weather those periods from ones that don’t isn’t just their financial position—it’s whether they understood their contractual rights and obligations before the dispute arrived at the door.

The Hormuz crisis is not resolved. As of late April 2026, Iran has stated that reopening the strait is impossible while the U.S. blockade remains in place, and the ceasefire remains fragile. Rystad Energy estimates meaningful recovery in oil flows is months away. The legal and commercial pressures on oilfield services companies will continue to build in the interim.

The contracts you have today were written for a different market. Understanding exactly what they say—and what they don’t say—is the starting point for managing through the one you’re in now.